Competition Effects in a Liberalized Railway Market

Abstract

This paper presents a game-theoretic model of a liberalized railway market, in which train operation and ownership of infrastructure are vertically separated. We analyze how the regulatory agency will optimally set the charges that operators have to pay to the infrastructure manager for access to the tracks and how these charges change with increased competition in the railway market. Our analysis shows that an increased number of competitors in the freight and/or passenger segment reduces prices per kilometer and increases total output in train kilometers. The regulatory agency reacts to more competition with a reduction in access charges in the corresponding segment. Consumers bene…t through lower prices, while individual pro…ts of each operator decrease through a higher number of competitors. We further show that the welfare e¤ect of increased competition in the freight and/or passenger segment is ambiguous and depends on the level of competition. Finally, social welfare is higher under two-part tari¤s than under one-part tari¤s if raising public funds is costly to society.

Goodbye monopoly: The effect of open access passenger rail competition on price and frequency in France on the high-speed paris-Lyon line

“…The second result is global consensus about the benefit for users in terms of frequency and price. Theoretically, competition should have a positive effect on social welfare by increasing frequency and reducing price (Lang et al, 2013;Feuerstein et al, 2018;Broman and Eliasson, 2019). Empirically, the effect is clear on frequency.…”

Increasing the efficiency of using backline and private railway infrastructure in the conditions of the transportation market

“…Such studies are given, for example, in [7]. The material accumulated to date makes it possible to build mathematical models based on game theory that describe the relationship between participants in the rail transportation market, as, for example, in the paper by Lang, et al [9]. At the same time, less attention is devoted to the problem of interaction between railway infrastructure fa cilities of different owners in a competitive market.…”

Railway liberalization, airport congestion toll, and infrastructure pricing: Modelling and numerical analysis for European and Chinese markets

“…Some authors did consider the pricing of infrastructure when there is intramodal competition. For instance, Lang et al (2013) investigated the impact of the number of operators on the access charge using a game theoretic model, and found that an increase in the number of operators leads to a higher access charge. For air transport, Verhoef (2010) studied airport congestion pricing in case of asymmetric airlines and found that the least efficient airline quits under differentiated charging.…”