Competition Issues in Restructuring Ports and Railways, Including Brief Consideration of these Sectors in India

One important issue facing reformers considering the restructuring of the seaports and freight railways sectors of a developing country is the creation of competition ­ or, alternatively, avoiding the creation or preservation of monopoly power. In seaports a crucial distinction is often that between intraport and interport competition; in freight railways, between competition among train operating companies over a monopoly track and competition among vertically integrated railways. In both cases it is useful to frame the issue as one of competition at the component level within an open system versus competition between closed systems. In both cases as well, the market definition paradigm suggested by the Horizontal Merger Guidelines of the U.S. competition agencies provides a useful framework for analysis.competition, ports, railways, market definition, India

Railway Mergers and Railway Alliances: Competition Issues and Lessons for Other Network Industries

Freight railway enterprises in both Europe and North America are in the process of significant restructuring, with EC policy changes dictating new ownership, organization, and cooperation arrangements in Europe and a series of major mergers having already led to highly concentrated regional markets in the U.S. and Canada. Mergers, alliances, and organizational changes may raise important and complex issues regarding the level of competition facing goods shippers, with differing implications depending on the differing institutional contexts. This paper examines the competitive consequences of these developments in Europe and North America and suggests some lessons for other network industries.railway, competition, mergers, alliances

Against the Stand-Alone-Cost Test in U.S. Freight Rail Regulation

The stand-alone-cost test has become an expensive, extensive, and time-consuming part of the regulatory practice of the U.S. Surface Transportation Board in the performance of its statutory duty to protect "captive shippers" from monopoly rail rates. Worse, a close examination of the history of its adoption and application suggests only a very tenuous connection with its claimed intellectual foundations, the classic works of Faulhaber (1975) and Baumol, Panzar, and Willig (1982). It is time to retire this tool and replace it with something simpler and more effective and transparent.

Who Are You Calling Irrational? Marginal Costs, Variable Costs, and the Pricing Practices of Firms

Economists sometimes decry the persistence with which firms set prices above marginal cost and thus, according to the economists, fail to maximize profits. But it is the economists who have it wrong – first, because variable accounting costs are not always a good proxy for marginal economic costs, but more importantly because in an industry with U-shaped cost curves, a firm at a long-run sustainable equilibrium faces increasing marginal costs – i.e., a rising shadow price on some constrained input – i.e., in general, acost of capital. A corollary is that in such an industry the equilibrium mark-up over variable cost varies directly with capital intensity.market power, price, mark-up, marginal cost, variable cost

Electricity Restructuring in China: The Elusive Quest for Competition

The continuation of China’s remarkable economic growth will depend on continued increases in electricity supply. China has commenced a program of electricity sector restructuring, with the announced aim of relying on markets and competition to provide incentives for attracting private investment and encouraging efficiency. However, a close examination of the generation markets being created suggests that truly free wholesale prices are likely to be both high and volatile. This may be the reason that these prices have not yet been freed – and it may not bode well for true market liberalization in the future.Electricity Restructuring, Competition, China

Abuse of Dominance Enforcement under Latin American Competition Laws

The spread of competition laws in Latin America has been accompanied, as in Central and Eastern Europe, by warnings against over-enforcement, and in particular against enforcement of provisions against the "abuse of a dominant position" in a market that may discourage legitimate, pro-competitive actions and strategies. We examine all instances of competition agency findings of abuse of dominance for eight Latin American countries over the period 2001-2003. We find a) that there have been relatively few such rulings in most countries, b) that roughly half of such rulings have been in traditionally "regulated industries", which suggests that the number of rulings may fall as sectoral regulatory agencies gain more capability and experience, c) that many rulings have arguably targeted government-imposed restrictions on competition as well as privately imposed restrictions, and d) that a majority of rulings have attacked exclusionary rather than exploitative abuses.

Blame the Switchman? Russian Railways Restructuring After Ten Years

The Russian economy relies on the Russian freight railways to an extraordinary degree. In 2001, after years of debate, the Russian government adopted an ambitious plan to transform this vertically integrated, government owned monopoly into a system that would rely more on private investment and competition and less on government ownership and regulation. This paper examines the state of the industry after ten years of reforms, with a focus on competition, tariffs, and private sector participation. Much remains to be decided, in particular the question of whether Russia will settle on its own unique model of railways restructuring or will move in the direction of one of the three standard models seen in other countries: vertical separation as in the UK and Sweden, third party access as in Germany and France, or horizontal separation, as in the US, Canada, and Mexico.freight railways, restructuring, competition, Russian Federation, vertical separation, third party access, horizontal separation

Will the Train Ever Leave the Station? The Private Provision of Freight Railway Service in Russia and Central and Eastern Europe

The railways of Russia and the CEE countries — generally much more freight oriented, and much more important to their countries' economies, than those of Western Europe — are in the process of restructuring. In most cases the "vertical separation" reform model is being pursued, and reformers are seeking to introduce competition among freight train operators through the provision of "open access" to the monopoly infrastructure. This paper examines the degree to which competition has in fact been introduced, the terms under which it is taking place, and the characteristics of those private firms which have had some success in entering. As always, Russia is different.