The Measurement of Transaction Costs - Evidence from European Railways

Rico Merkert, Andrew S. J. Smith and Chris A. Nash

Journal of Transport Economics and Policy, 2012, vol. 46, issue 3, 349-365

Abstract: Whether transaction costs increase following full vertical separation of railways has been the subject of much debate, but there is still little quantitative evidence on this question. This paper applies a bottom-up approach to compute transaction costs between train operation and infrastructure firms in three European rail systems for the first time (UK, Germany, and Sweden). It finds that although full vertical separation does raise transaction costs, they are at most only around 2 per cent to 3 per cent of total costs. Therefore, only modest benefits of vertical separation - for example, through increased competition - would be needed to outweigh them. © 2012 LSE and the University of Bath

Date: 2012
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