The effect of cooperative infrastructure fees on high-speed rail and airline competition

This paper explores the effects of cooperation between rail and air infrastructures in setting per-passenger fees prior to competition among airlines and high-speed rail (HSR) in a transport network. It is shown that, for a sufficiently low degree of substitution, cooperation results in lower fees and greater HSR traffic than under competition. Besides, it leads to more connecting passengers. An empirical application allows for a quantitative assessment of cooperation. Gains to passengers and operators are sizeable when cooperation either involves all infrastructure managers or the rail and the hub airport managers. Welfare gains are in the range of 10.4–11.1%. Our contribution offers an ex-ante analysis about the benefits of intermodal cooperation at the upstream level

The impact on port competition of the integration of port and inland transport services

The performance of the transport chain is important for the efficiency and competitiveness of an economy. In the context of port competition, there has been an increasing cooperation between firms involved in the intermodal transport chain including seaport services. This paper examines the economic incentives and welfare implications to the integration of port activities with inland transport services under inter-ports competition. Although ports find it advantageous to engage in such integration process it may be detrimental to welfare, since shippers' aggregate surplus decreases - noting that farther away users benefit at the expense of those closer to the ports. Several scenarios not leading to such welfare decrease are identified: asymmetries in port capacities, government regulation and efficiency gains. These latter results provide support to policies that favor integration processes of transport service

A three-stage competition game in an air transport network under asymmetric valuation of flight frequencies

This paper analyzes the effects of changes in aeronautical charges as brought by several airport management regimes on the air transport industry. Airlines compete on both price and non-price variables, where connecting passengers have asymmetric valuations of flight frequencies in different legs. Changes in landing fees trigger airlines reactions on flight frequencies and airfares, whose sign depends on the weight attached to flight frequencies. Thus, an increase in the spoke landing, fee leads to more international flights under low valuations of frequencies at spoke airports. Simulation exercises show that profit-maximizing aeronautical charges only as the spoke airport are preferable to those either only at the hub airport or at both airports. Welfare losses are lower when airports are granted to a unique infrastructure manager rather than to independent ones. When frequencies in the hub are highly valued, profit-maximizing charges only at the spoke airport will likely induce a welfare increase

Alternative pricing regimes in interurban passenger transport with externalities and modal competition

We develop an interurban passenger transport model with modal competition, where modes are perceived as differentiated products, and capture all major externalities. Our objective is to establish whether alternative regulatory regimes, which may involve road tolls, may lead to a traffic allocation, user welfare, and total welfare that may be closer to the social optimum. An empirical application to interurban Spanish travel is undertaken. We find that the private regime yields the lowest total welfare level: 12.6% below the social optimum level. Optimum pricing requires a toll on car transport of 5.1 cents of per passenger-km, and a price decrease of all other modes, relative to the current regime. Finally, the social optimum without toll regime attains the welfare level closest to the social optimum, though it implies a reallocation of welfare from firms to users and higher environmental costs.Interurban transport Optimal pricing Competition Externalities

Viability of new road infrastructure with heterogeneous users

This paper explores the importance of heterogeneity in value of time and route choice when assessing the viability of new road infrastructure to alleviate congestion problems. The model incorporates strategic interaction between road operators in a cost-benefit framework and several competitive regimes are considered. It is then employed to establish the financial and socio-economic viability of a congestion pricing demonstration entering Madrid city centre, where road users have to choose between a free but highly congested road and a priced free-flowing road (semi-private regime). A logit estimation is undertaken with information from a questionnaire among road users in the Eastern Madrid area to obtain users' value of time and of congestion. The tolls obtained generate a traffic reallocation towards the new roadway such that revenues suffice to render the infrastructure socio-economically viable. The private and the low toll regimes generate similar welfare gains that are close to the first best. Yet the former supposes large losses to users. The low toll and the semi-private regimes do not raise such distributional concerns. However, the low toll regime requires a sufficiently high traffic growth rate to make it financially viable; this does not happen for the other competitive regimes.Parallel road network Heterogenous users Viability

Can competition for and in the market co-exist in terms of delivering cost efficient services? Evidence from open access train operators and their franchised counterparts in Britain

This paper aims to inform an important policy debate in Europe on how best to open up passenger rail markets to increased competition: and specifically, whether to allow open access train operators alongside franchised (tendered) operators. The paper utilises new British data to analyse the cost side of this debate. Our data is unique in that we have cost data by route level for both the incumbent (corresponding to British franchises) and the open access operators, as opposed to only having cost data on the incumbent at the network level as in other countries. The open access operators are found to have comparable unit costs to franchised operators. This is unexpected considering the significant returns to density that benefit the larger franchised operators. This is subsequently found to be due to lower input prices and an ‘open access business model’ effect that outweigh any density disadvantages. Overall we find that there are negligible cost disadvantages of allowing open access operators to compete with franchised intercity operators

Competition for rail transport services in duopoly market: Case study of China Railway(CR) Express in Chengdu and Chongqinq

Known as the Belt and Road Initiative, China Railway(CR) Express is driving China's efforts to boost connectivity and explore regional cooperation with Eurasian markets. In order to investigate the fierce hinterland competition between two neighbouring CR Express lines, this paper first formulates a non-cooperative game model to explore strategic decisions on pricing accounting for competition in a spatial setting, given frequency, government subsidy, local road infrastructure investment, and operation costs. We then extend the model to analyze decisions on frequency and pricing together, and the implications for social welfare, profits and market share as well. Based on a case study of CR Express lines originating from Chengdu and Chongqing to Hamburg, we verify our model and conclude some findings. The results show that government subsidy is the major factor that influences operators pricing strategy. Also, frequency and local road infrastructure investment have effects on operators' decisions. For the government, giving more freedom to operators, that is letting operators decide their frequency, is a good way to bring benefits for both social welfare and operator profits