Abstract
Sweden has been a front runner in vertical separation. We use data from the business long-distance corridor in Sweden to calibrate and define a demand and supply model. We simulate how the profit, welfare, fares, frequencies, modal shares and train size depend on the level of the track charges. We simulate the welfare optimal track charges, given different levels of congestion on the track, hence using the charges as a pricing instrument to allocate the train slots efficiently. We find that increases in charges have a limited impact on fares but larger impacts on the frequency. When the length of the trains can be extended and when the crowding penalty is high, the impact of higher track charges on the frequencies is larger. Higher track charges increase the length of the trains if possible. The intermodal competition from road and air has a significant impact on rail fares.
Highlights
Over the past decades, the European Commission has promoted vertical separation on the railway market, where rail operators are separated from the public infrastructure manager (IM)
The train frequency is defined as a discrete number and the optimal frequency will not vary for track charges within a certain range
There is a notion that increases in track charges will be passed on to rail users in the form of higher fares
Summary
The European Commission has promoted vertical separation on the railway market, where rail operators are separated from the public infrastructure manager (IM). Rail access, or track charges are indispensable for welfareefficient allocation of capacity, because the public IMs do not have full information regarding demand and operation costs (Ait Ali, 2020). Both Sweden and the UK apply charges below the marginal social cost (Nash et al, 2018). Besanko and Cui (2019) compare the scenarios where track charges in a vertically separated market can be regulated or and when they are negotiated between the company owning and managing the infrastructure and the commercial train operators They find that negotiation would produce higher welfare, if the infrastructure com pany were allowed to price discriminate.
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