Train path congestion management: Using hybrid auctions for decentralized railway capacity allocation

Abstract

Despite the entry of new competitors into the railway market in European countries, the capacity allocation mechanism still relies on the same service priority criteria as before the adoption of 91/440/EEC Directive. Without the implementation of a market-based mechanism or criteria, the current administrative approach of network capacity allocation inhibits further development of competition and especially freight railway transport. In this paper, the application of auctions is limited to a part of railway infrastructure. In view of the specificities of the railway sector and the nature of infrastructure capacity, the following question can be raised: Are there auction mechanisms that reduce the likelihood of collusion and at the same time achieve a high degree of efficiency of capacity allocation? In such a context, this article considers the implementation of hybrid auctions for the purpose of train path allocation. In order to facilitate the implementation of various types of auctions in allocation procedure on railways, this paper develops and models an algorithm for iterative train paths allocation. With the proposed algorithm, the auction outcomes have been determined in a simulation with the objective of comparing the performances of hybrid (two-phase) auctions: Anglo-Dutch and second-price Amsterdam auction with some well-known standard-type auctions: English and sealed-bid first-price auction. The results indicate that hybrid auctions are a better choice in European conditions when railway undertakers are asymmetric, especially if there is a threat of collusion. These results could help an IMs to decide which type of auction mechanism to choose for the railway capacity allocation.