Are Britain’s railways costing too much? Perspectives based on TFP comparisons with British Rail: 1963-2002.

Following the Hatfield accident in October 2000, the cost of running Britain’s railways has increased very sharply, leading to considerable debate about whether current cost levels are reasonable. This paper seeks to inform this debate by assessing post-Hatfield cost and TFP levels (2000/01 to 2001/02) against the historical precedents set by British Rail and the early experience of the newly-privatised industry (1963 to 1999/00). The results show that industry cash costs rose by 47% between 1999/00, the last financial year before Hatfield, and 2001/02 - but, surprisingly, with train operating costs (TOCs and freight operators) accounting for 42% of this growth. The results also show that the post-Hatfield cost spike is unprecedented when compared against historical benchmarks, indicating that recent cost rises cannot simply be explained by the investment cycle or so-called “bow-wave” effects. Furthermore, according to the preferred models, post-Hatfield productivity levels are lower than at any time over the last four decades. Analysis of long-term data on quality and safety measures indicates that an excessive focus on rail safety may offer part of the explanation for the recent cost growth, with the emphasis on safety also resulting in less attention to punctuality and reliability

Airline schedule punctuality management

Airline schedule punctuality is a complex problem and one of the major concerns of the airline top management. Flight schedule disturbances may occur as delays and/or cancellations. There are many internal and external reasons for delays. These delays may propagate in the aircraft cycles and cause a large schedule disturbance. This may influences passenger satisfaction and airline resources. The objective of this research is to formulate a systematic approach for schedule punctuality which supports management decision making. The punctuality management system is structured to combine all schedule punctuality components, input and output variables. Five models are incorporated in this system. The first model is the disturbance model which generates random delays based on an estimated Lognormal delay distribution function. The delay analysis is carried out from a one year sample of delay statistics in which general, original , reactionary and other delay types are classified. The second model is the recovery model which incorporates the disturbance model with management strategies to determine delay propagation. A PC based simulation model (SKDMOD) is developed as a prototype which integrates disturbance and recovery models using SIMSCRIPT 11.5. 18 management strategies are simulated covering ground times (30, 40 and 50 minutes), maximum delay times to assign spare aircraft (1, 2, 3, 4, 5, and 6 hours) and spare aircraft using part of the domestic network of Saudi Arabia. The third model is the passengers' attitude model which determines the delay impact functions and the maximum passenger revenue loss based on 262 responses from a passenger interview survey. The fourth model is the revenue model which estimates the passengers' revenue loss. The fifth model is the cost model which estimates the extra cost resulting from implementation of the management strategies. All strategies are evaluated to determine the optimum based on profit and profit margin. OPTIM is the optimization program developed to find the optimum strategy(ies). This approach provides a guidelines for the management of punctuality. It integrates all the tools developed in a decision support system framework

Estimation of indirect cost and evaluation of protective measures for infrastructure vulnerability: A case study on the transalpine transport corridor

Infrastructure vulnerability is a topic of rising interest in the scientific literature for both the general increase of unexpected events and the strategic importance of certain links. Protective investments are extremely costly and risks are distributed in space and time which poses important decision problems to the public sector decision makers. In an economic prospective, the evaluation of infrastructure vulnerability is oriented on the estimation of direct and indirect costs of hazards. Although the estimation of direct costs is straightforward, the evaluation of indirect cost involves factors non-directly observable making the approximation a difficult issue. This paper provides an estimate of the indirect costs caused by a two weeks closure of the north-south Gotthard road corridor, one of the most important infrastructure links in Europe, and implements a cost-benefit analysis tool that allows the evaluation of measures ensuring a full protection along the corridor. The identification of the indirect cost relies on the generalized cost estimation, which parameters come from two stated preference experiments, the first based on actual condition whereas the second assumes a road closure. The procedure outlined in this paper proposes a methodology aimed to identify and quantify the economic vulnerability associated with a road transport infrastructure and, to evaluate the economic and social efficiency of a vulnerability reduction by the consideration of protective measures.infrastructure vulnerability, choice experiment, cost-benefit analysis, freight transport

Analyzing loss aversion and diminishing sensitivity in a freight transport stated choice experiment

Choice behaviour might be determined by asymmetric preferences whether the consumers are faced with gains or losses. This paper investigates loss aversion and diminishing sensitivity, and analyzes their implications on willingness to pay and willingness to accept measures in a reference pivoted choice experiment in a freight transport framework. The results suggest a significant model fit improvement when preferences are treated as asymmetric, proving both loss aversion and diminishing sensitivity. The implications on willingness to pay and willingness to accept indicators are particular relevant showing a remarkable difference between symmetric and asymmetric model specifications. Not accounting for loss aversion and diminishing sensitivity, when present, produces misleading results and might affect significantly the policy decisions.freight transport, choice experiments, willingness to pay, preference asymmetry

The role of the reference alternative in the specification of asymmetric discrete choice models

Within the discrete choice modelling literature, there has been growing interest in including reference alternatives within stated choice survey tasks. Recent studies have investigated asymmetric utility specifications by estimating discrete choice models that include different parameters according to gains and losses relative to the values of the reference attributes. This paper analyses asymmetric discrete choice models by comparing specifications expressed as deviations from the reference point and specifications expressed in absolute values. The results suggest that the selection of the appropriate asymmetric model specification should be based on the type of the stated choice experiment.stated choice experiments, reference alternative, preference asymmetry, willingness to pay

Punctuality - A Cultural Trait as Equilibrium

A people's culture, norms and habits are important determinants not just of the quality of social life but of economic progress and growth. In this paper we take the view that while the importance of culture is undeniable, the innateness of culture is not. We work here with a single example and demonstrate how a human trait which is widely believed to be cultural is at the same time a matter of choice. The example that we shall work with concerns punctuality. We show that punctuality may be simply an equilibrium response of individuals to what they expect others to do. The same society can get caught in a punctual equilibrium or a non-punctual equilibrium. Punctuality; Coordination Games

Accounting for WTP/WTA discrepancy in discrete choice models: Discussion of policy implications based on two freight transport stated choice experiments

A key input in cost-benefit analysis is represented by the marginal rate of substitution which expresses the willingness to pay, or its counterpart willingness to accept, for both market and non-market goods. The consistent discrepancy between these two measures observed in the literature suggests the need to estimate reference dependent models able to capturing loss aversion by distinguishing the value attached to a gain from the value attached to a loss according to reference dependent theory. This paper proposes a comparison of willingness to pay and willingness to accept measures estimated from models with both symmetric and reference dependent utility specifications within two different freight transport stated choice experiments. The results show that the reference dependent specification outperforms the symmetric specification and they prove the robustness of reference dependent specification over datasets designed according different attributes levels ranges. Moreover we demonstrate the policy relevance of asymmetric specifications illustrating the strong implications for cost-benefit analysis in two case studies.WTP/WTA discrepancy, freight choice, policy evaluation

Testing for nonlinearity in the choice of a freight transport service

Manufacturing firms buy transport services with the aim of minimizing their total logistics cost. There is a large amount of literature analyzing how shippers value the various characteristics of a transport service, mostly performed by collecting stated-preference data and estimating discrete choice models. Most of the empirical studies specify the deterministic part of the utility functions as linear in the observed attributes. This implicitly constrains the characteristics of the analyzed transport service to be perfect substitutes, and to have a constant substitutability ratio. Such an assumption is inconsistent with the standard microeconomic theory, typically assuming inputs’ decreasing marginal productivity, and may not be realistic. The paper tests the linearity assumption for freight rate, travel time, probability of having damaged and lost freight, frequency, flexibility, mode and punctuality on a sample of Italian small- and medium-sized manufacturing enterprises (SME). Our findings suggest that the linearity-in-the-attributes assumption should be rejected and that the marginal impact on the utility-of-profit of the attributes is not constant. More specifically travel time and freight rate produce decreasing marginal reductions of the utility-of-profit; while safety (percentage of not damaged or lost shipments) and punctuality (percentage of shipments on time) are responsible for increasing marginal contributions to the utility-of-profit. The substitutability ratios between (a) freight rate and loss and damage, (b) freight rate and travel time, (c) freight rate and punctuality, (d) travel time and damage and loss and (e) travel time and punctuality are estimated and found not constant. Finally, it is found that the willingness to pay for the qualitative attributes obtained with a linearly specified model tend to be overestimated

Testing for nonlinearity in the choice of a freight transport service

Manufacturing firms buy transport services with the aim of minimizing their total logistics cost. There is a large amount of literature analyzing how shippers value the various characteristics of a transport service, mostly performed by collecting stated-preference data and estimating discrete choice models. Most of the empirical studies specify the deterministic part of the utility functions as linear in the observed attributes. This implicitly constrains the characteristics of the analyzed transport service to be perfect substitutes, and to have a constant substitutability ratio. Such an assumption is inconsistent with the standard microeconomic theory, typically assuming inputs’ decreasing marginal productivity, and may not be realistic. The paper tests the linearity assumption for freight rate, travel time, probability of having damaged and lost freight, frequency, flexibility, mode and punctuality on a sample of Italian small- and medium-sized manufacturing enterprises (SME). Our findings suggest that the linearity-in-the-attributes assumption should be rejected and that the marginal impact on the utility-of-profit of the attributes is not constant. More specifically travel time and freight rate produce decreasing marginal reductions of the utility-of-profit; while safety (percentage of not damaged or lost shipments) and punctuality (percentage of shipments on time) are responsible for increasing marginal contributions to the utility-of-profit. The substitutability ratios between (a) freight rate and loss and damage, (b) freight rate and travel time, (c) freight rate and punctuality, (d) travel time and damage and loss and (e) travel time and punctuality are estimated and found not constant. Finally, it is found that the willingness to pay for the qualitative attributes obtained with a linearly specified model tend to be overestimated

Passenger Rail Statistics Following the Privatisation of British Rail.

In common with other major industries, the rail industry requires significant amounts of high quality information for successful operation. Information relating to the demand and supply of rail services is required to ensure that appropriate services are provided at minimum cost. Given the recent explosion of information technology, data on demand and supply is readily accessible and much improved. The benefits to the industry arising from such improvements should be maintained under the new organisational structures brought about by the 1993 Transport Act. It is the aim of this note to outline current sources of information and key statistics and raise the issue of what provisions are being made to ensure that they are maintained in a consistent and compatible format following privatisation