Vertically Separated Research Articles

Efficiency versus market power in the rail industry

Although an extensive literature exists that examines efficiency in rail markets, analyses that also study the market power of rail operators are scarce. We examine the effects of competition and vertical separation on efficiency and price-cost margins. In doing so we propose a two-stage procedure. Firstly, efficiency and Lerner indexes will be obtained for a sample of rail operators for the period 2000–2016. Secondly, the determinants of both indexes are jointly estimated. Results indicate that integrated incumbents not facing competition perform worst and exert the highest market power. Vertically separated and specialized in passenger services operators display the strongest improvements in efficiency levels, while integrated incumbents facing competition show the lowest market power indexes. Finally, more efficiency translates to smaller values of the Lerner index.

Exploiting environmental asymmetry for vessel localization from the vertical coherence of radiated noise.

A method to determine the range and bearing of a moving broadband acoustic source, such as a surface vessel, using the coherence measured on two omni-directional, vertically separated hydrophones is demonstrated using acoustic data recorded near Alvin Canyon on the New England shelf break. To estimate the vessel's range, two theoretical approaches, a half-space model and a Pekeris waveguide model based on normal modes, establish simple relationships between the broadband signal coherence and frequency, source range, and the vertical separation of the receiver hydrophones. A brute force inversion produces a passive acoustic estimate of vessel range. Rapidly changing bathymetry with large features, such as that near Alvin Canyon, produces azimuthal asymmetry in the plan-view coherence pattern about the receivers due to horizontal refraction, focussing, and the up- (down-) slope compression (extension) of modal interference patterns. For vessels with a constant speed and heading, this generates an asymmetry in the received power and vertical coherence fringing pattern. This effect is first demonstrated using reciprocal three-dimensional parabolic equation and raytracing models in an idealized Gaussian canyon, then observed in Alvin Canyon measurements. By comparing the experimental observations to the modeled coherence, the vessel's bearing and range relative to the receivers are obtained.

European railway deregulation: an overview of market organization and capacity allocation

European railways have been reorganized to allow for market competition. Thus, train services have been vertically separated from infrastructure management which allows several operators to compete. Different ways have emerged for vertical separation, capacity allocation and track access charges. This paper reviews important deregulation aspects from a number of European countries. The study compares how competition has been introduced and regulated with focus on describing capacity allocation and track access charges. Although guided by the same European legislation, we conclude that the studied railways have different deregulation outcomes, e.g. market organization, capacity allocation. Besides, few countries have so far managed to have efficient and transparent capacity allocation. Although allowed by the legislation, market-based allocation is absent or never used. To foster more competition which can yield substantial social benefits, the survey indicates that most European railways still need to develop and experiment with more efficient and transparent capacity allocation procedures.

Towards a vertically separated broadband infrastructure: The potential role of voluntary separation

Public policymakers face the challenge of maintaining incentives for investments in fiber-to-the-premises (FTTP) infrastructure while simultaneously enabling effective competition. In that regard, the ability of vertically integrated operators to discriminate against downstream rivals is regarded as a major regulatory problem, especially as policing nondiscrimination obligations is notoriously difficult for vertically integrated operators. The European regulatory framework mandates functional separation to eliminate discrimination incentives. However, this measure comes with significant drawbacks and caveats and resembles a strong market and ownership intervention. The present article discusses how voluntary vertical separation can achieve the positive effect of a vertically separated industry structure without the need for strong market interventions. We use a discounted cash flow model to compare the financial attractiveness of wholesale-only and integrated business models for a greenfield FTTP rollout. We further discuss and test how public policymakers could positively affect the profitability of a wholesale-only business model. Based on our findings, we recommend public-policymakers and national regulation authorities to proactively define separation scenarios and respective ex ante regulation reductions precisely, to make adjustments to broadband state aid programs that favor wholesale-only providers, and to critically reflect the hampering effect volume and time discount wholesale tariff structures of incumbents have on the emergence of wholesale-only networks.

ВПЛИВ ЕВОЛЮЦІЙНИХ ПРОЦЕСІВ НА РОЗВИТОК ІНФРАСТРУКТУРИ ЗАЛІЗНИЧНОГО ТРАНСПОРТУ

The article deals with the stages of railway transport infrastructure component evolutionary development. It is noted that with the loss by the railway industry of its naturalness, as it is a natural monopoly, the status of the infrastructure in it changes. Herewith, as a rule, a new model for managing railway transport is formed. The next stage in the development of infrastructure begins. The author outlines the reasons for the transition from one stage in the evolution of infrastructure to the next.In the process of research, three stages of the evolutionary development of railway transport infrastructure are identified. The first one is when infrastructure acts as a component of monopoly formation. The second one is when an infrastructure company becomes a vertically separated independent entity. The third one is when an infrastructure company becomes a member of a vertically integrated association created through strategic partnerships with carrier operators and the state. It is proved that changing the place of the infrastructural component determines the features of its functioning and the degree of risk. The characteristic features of the infrastructure company at each stage of development are highlighted. The emphasis is placed on the practicability of allowing Ukrainian railway companies to pass the second stage in infrastructure development.It is noted that the functioning of the infrastructure company as a part of a vertically integrated association through the development of strategic partnerships with carrier operators is more acceptable and appropriate. The world experience shows that for railway networks with a high traffic density and a large share of freight trains, the advantage is not the vertical separation and attempts to introduce competition, but the improvement of the state policy in the field of railway transport, motivation and management systems in the industry.

Regulated Versus Negotiated Access Pricing in Vertically Separated Railway Systems: Online Appendix

This paper studies access pricing under three regimes: regulated access (VSR), negotiated access with discriminatory pricing (VSD) and negotiated access with non-discriminatory pricing (VSN). We compare each regime along three metrics: network quality, consumer surplus, and social welfare. To do so, we use a three-stage game, in which the regulator can commit to the access tariff under VSR and the network firm and the transport operators need to bargain over the access tariff under VSD and VSN. Each approach is second best, resulting in equilibrium qualities and quantities that are less than first-best levels, and the comparison between regulated and negoitated access is ambiguous. However, under a wide range of circumstances VSD and VSN result in greater investment to upgrade network quality than VSR. Computational analysis reveals that if the bargaining power of the network firm under negotiated access is sufficiently strong, VSD tends to result in higher social welfare than VSR. However, VSR often results in higher consumer surplus.

Optimal patent policy in the presence of vertical separation

We examine a license contract in vertically separated markets, in which an inventor and a manufacturer bargain over royalties. The hold-up problem is found to be bilateral in that not only the licensor but also the licensee can delay the introduction of new technology. Given the probabilistic validity of patents and penalty upon infringement as patent instruments, we derive the optimal policies as a mix of them; not only can they always maximize the total amount of wealth but also they allocate the wealth according to each firm’s contribution to the introduction of new technology. From the perspective of patent reform, our model supports the entire market value rule on the ground that it can always yield the first-best result. We also show that there is scope for self-correction in the market; even without the government’s intervention, firms can adjust their bargaining power to improve social welfare to a certain extent.

A study of vertical separation in Japanese passenger railways

In recent years, the Japanese railway sector adopted vertical separation in certain circumstances. This research investigated the recent Japanese policies and clarified the characteristics of vertically separated railways in Japan compared with those in Europe. When we consider the current status of Japanese railways where traffic is dense on many lines, the study concludes that a single railway company should manage railway operations as a whole even if the public sector retains ownership of the infrastructure. As one of the lessons learned from European experiences, it appears worthwhile to introduce railway operations based on a public-private contract for more cases in regional rail transport in Japan.

Agricultural gas emissions during the spring thaw: Applying a new measurement technique

Abstract A new micrometeorological technique is applied to measure gas emissions from soils. The technique relies on a single open-path FTIR sensor (OP-FTIR) with motorized aiming to give gas concentrations along vertically separated paths (not necessarily parallel with each other). Emission rates are inferred from the vertical difference in concentration using two alternative methods: flux-gradient and inverse dispersion calculations. Our objective is to assess the capability of the technique in a field study measuring nitrous oxide (N2O) and ammonia (NH3) emitted from cattle overwintering areas during the spring thaw. Two field configurations were examined: a slant path configuration in which the OP-FTIR is aimed directly at high and low reflectors at the far end of the path (average vertical path separation ∼ 1 m), and a periscope configuration where the lower FTIR path was directed closer to ground along the whole path (average path separation ∼ 1.5 m). Measured emission rates were generally above the detectability threshold of the system and consistent with the scientific literature showing an emission rise during thawing. At one of our sites the pulse of N2O emitted during thawing was among the largest reported (9.9 kg N-N2O ha−1 during April). Of the two alternatives tested for calculating emissions, the inverse dispersion approach is more flexible, but with a computation time that can be prohibitive. With large measurement fetches the flux-gradient approach can be equally good and computationally faster. We conclude that the open-path gradient system provides a practical option for studying emissions in difficult environments.

Optimal Patent Policy in the Presence of Vertical Separation

We examine the problem of license contracts in vertically separated markets in which the inventor and the manufacturer bargain over royalties in the presence of probabilistic patents and penalty upon infringement. We show that an excessive protection of patent rights can rather delay the introduction of new technology and eventually harm the patent holder's interests. Furthermore, we derive the optimal patent policies which can always maximize social welfare by aligning both parties' incentive to invest; not only can they induce the first-best result in terms of the total wealth but also they allocate the wealth in accordance with the firms' contribution. From the perspective of patent reform, our model supports the application of the entire market value rule to the doctrine of reasonable royalty on the ground that it can always yield the first-best result. We also show that there is room for self-correction in the market even without the optimal policies in that social welfare can be improved to a certain extent by the firms' bargaining over bargaining power.

The superparamagnetic response of transient AEM data

SUMMARY Several lines of VTEM data flown at different system elevations across a known sulphide body and surface cover with elevated superparamagnetic (SPM) properties were analysed with MAXWELL, layered-earth inversions, LEROIAIR and LEROI. The SPM material was modelled with frequency-dependent magnetic susceptibilities at shallow depth. Due to their slow late-time decay, SPM responses can be confused with responses of deep conductors and vice versa. Depending on the parameter weighting used, 1D inversions model all late-time responses as deep conductive material or as surficial SPM material. However, the joint 1D inversion of data acquired at different system elevations manages to recover a deep conductor from the sulphide anomaly and elevated SPM values at the location of the SPM response. For the modelled parameters, the VTEM data sets from two elevations (at 70 and 80 m) require a vertical separation of about 10 m to allow for the discrimination between the SPM and sulphide responses. For lower system elevations, less sensor separation is necessary due to the strong gradient of the SPM response. We suggest that two vertically separated receivers could be used to measure the AEM gradient and depending on the flying height of the transmitter, the vertical offset of the receivers should be between 2 and 40 m.

Modelling the superparamagnetic response of AEM data

Several lines of VTEM data flown at different system elevations across a known sulphide body and surface cover with elevated superparamagnetic (SPM) properties were analysed with MAXWELL, layered-earth inversions (LEI), LEROIAIR and LEROI. The SPM material was modelled with frequency-dependent magnetic susceptibilities at shallow depth.Due to their slow late-time decay, SPM responses can be confused with responses of deep conductors and vice versa. Depending on the parameter weighting used, 1D inversions model all late-time responses as deep conductive material or as surficial SPM material. However, the joint 1D inversion of data acquired at different system elevations manages to recover a deep conductor from the sulphide anomaly and elevated SPM values at the location of the SPM response. For the modelled parameters, the VTEM datasets from two elevations (at 70 and 80 m) require a vertical separation of ~10 m to allow for the discrimination between the SPM and sulphide responses. For lower system elevations, less sensor separation is necessary due to the strong gradient of the SPM response.Following the determination of SPM parameters from VTEM survey data, these values were used to hypothesise the SPM response for a range of system geometries, showing that larger transmitter loops and larger offsets between transmitter and receiver loops reduce SPM effects. We suggest that two vertically separated receivers could be used to measure the airborne electromagnetic (AEM) gradient and depending on the flying height of the transmitter, the vertical offset of the receivers should be between 2 and 40 m. If gradient data are not collected, then EM responses measured during the transmitter on-time and x-component data, if available, might offer some model discrimination.Whereas synthetic data of the examined helicopter TEM systems VTEM, AEROTEM and HELITEM indicate a fairly high sensitivity to SPM effects, fixed-wing MEGATEM data are much less affected, due to the higher transmitter elevation and large transmitter loop – receiver separation. SPM effects on data of frequency-domain systems such as the RESOLVE system are also small.

Can access regulation promote broadband investment and consumer welfare?

A facility-based firm invests in network quality and sells wholesale local access to two competing downstream firms, which offer vertically differentiated value-added services. We show that, contrary to common wisdom, access price regulation may simultaneously improve consumer welfare and foster investment incentives compared with regulatory forbearance. This result is robust to a number of different model specifications: (i) the bottleneck owner is vertically integrated, and: (a) the regulator can commit before the investment stage, or: (b) there are first-mover advantages, such as consumer switching costs; (ii) the bottleneck owner is vertically separated. We also show that, under access price regulation, consumer welfare and network quality may be higher under vertical separation than under vertical integration.

Mitigating expropriation risk through vertical separation of public utilities: The case of Argentina

In 2002, Argentina devalued its currency and froze public utility rates thus breaching the guarantees granted to investors the decade before. Those guarantees had lowered investors' cost of capital by substantially reducing expropriation risk. This paper looks into the governance structure chosen by Argentina for the privatization process and potential alternatives after a decade of contract breaches. Future governance should be market-oriented, involving vertically separated companies with former public utilities voluntarily acting as operating companies or OpCos, and NetCos in charge of all network expansions under the structure of PPPs created for such purposes.

Binocular capture: The role of non-linear position mechanisms

When monocular Vernier targets are presented with binocular disparate elements, an increase in vertical separation elevates alignment thresholds and also shifts its perceived visual direction towards the visual direction of the binocular disparate surround. This observation has been termed binocular capture. There is increasing evidence that this shift in the visual direction of the monocular target may be related to the type of position encoding mechanism involved in processing the relative position signal. This study investigated the interaction between capture magnitude and vertical separation for stimulus conditions that favored the recruitment of linear or non-linear position encoding mechanisms. Relative alignment thresholds and bias were measured for a pair of vertically separated (8', 30', 60', 120') monocular Gabor gratings (1, 2, 4 and 8 cpd). Grating stimuli were constructed to constrain relative alignment judgments to the carrier grating (CO) or to the envelope (EO). Relative alignment thresholds and bias were also measured for a pair of vertically separated monocular Gabor gratings comprising a 1 cpd vertical square wave grating (SQ) or a 1 cpd missing fundamental grating (MF). Capture magnitudes were significantly larger across vertical separation and varied proportionally with relative alignment threshold for the EO and MF conditions. This was not evident with the CO and SQ conditions. The stark difference in capture magnitudes between the stimuli conditions suggest that the increase in capture magnitude observed with increasing vertical separation is intimately related to the transition from a "capture-immune" first-order spatial filter mechanism to a "capture-vulnerable" non-linear/feature-based position encoding mechanism.

Vertical Separation with Private Contracts

We consider a manufacturer's incentive to sell through an independent retailer, rather than directly to final consumers, when contracts with retailers cannot be observed by competitors. If retailers conjecture that identical competing manufacturers always offer identical contracts (symmetric beliefs), manufacturers choose vertical separation in equilibrium. Even with private contracts, vertically separated manufacturers reduce competition and increase profits by inducing less aggressive behaviour by retailers in the final market. Manufacturers’ profits may be higher with private than with public contracts. Our results hold both with price and with quantity competition and do not hinge on retailers’ beliefs being perfectly symmetric. We also discuss various justifications for symmetric beliefs, including incomplete information.

Binocular capture: The effects of spatial frequency and contrast polarity of the monocular target

The influence of binocular disparate targets on the perceived visual direction of adjacent monocular targets has been termed “binocular capture”. The magnitude of capture increases significantly with increasing vertical separation between monocular targets. This study sets out to elucidate the interaction between spatial frequency content, contrast polarity and vertical separation between monocular targets to establish the roles of the monocular target’s positional uncertainty and the underlying position-encoding mechanism in the production of binocular capture. Relative alignment thresholds and bias were measured separately for a pair of vertically separated monocular Vernier spatial frequency ribbons and a pair of monocular Gaussian bars presented across a random dot stereogram. Ribbon pairs comprised carrier frequencies that were either matched (8 cpd or 1 cpd) or mismatched (top ribbon 1 cpd, bottom ribbon 8 cpd, and vice versa). The Gaussian bars were presented with either matched contrast (bright/bright) or opposite polarity (bright/dark) contrast. Capture magnitudes increased significantly with vertical separation for all ribbon conditions and for both contrast polarity conditions. In these conditions, capture magnitude co-varied with relative alignment threshold. The matched 1 cpd ribbons showed a significant effect of separation and relative alignment threshold on capture magnitude for low contrast stimuli but not for high contrast stimuli. The results are consistent with the hypothesis that perceived visual direction of a monocular target becomes increasingly dependent on the surround visual direction when its relative position signals are poor. Furthermore, its vulnerability to capture by the surround visual direction seems to be dependent on the underlying position encoding mechanism employed to compute relative position information of the monocular target.

Rail operation–infrastructure separation: the case of Kobe rapid transit railway

Vertical separation in the rail industry is common in Europe, but evaluation of the policy has been insufficient. The main purpose of this paper is to explain one method of operation–infrastructure separation as practiced in the case of Kobe Kosoku, a unique rail infrastructure owning company in Japan, as well as to discuss practical coordination problems related to structuring separation. Our overall conclusion is that vertically separated systems do not have significant advantages over vertically integrated systems in terms of the maintenance costs of infrastructure. In fact, the results of our analysis of infrastructure maintenance costs indicate that vertically separated systems might not be significantly different from vertically integrated ones.

Structure and function of nitrifying biofilms as determined by molecular techniques and the use of microelectrodes

The phylogenetic diversity of a nitrifying bacterial community of two types of nitrifying biofilms, a domestic wastewater biofilm and an autotrophic nitrifying biofilm grown on rotating disk reactors (RDR), was characterized by 16S ribosomal DNA (rDNA)-cloning analysis. Thereafter, successional development of nitrifying the bacterial community within both biofilms was visualized in situ by fluorescent in situ hybridization (FISH) wih a set of fluorescently labeled 16S rRNA-targeted DNA probes. In situ hybridization revealed that Nitrosomonas ureae was the numerically dominant species of the ammonia-oxidizing population in the domestic wastewater biofilm and that a population shift from N. urea to N. europaea and N. eutropha occurred when the culture medium was switched to the synthetic media from the domestic wastewater. After reaching the steady-state condition, microprofiles of NH4+, NO2-, NO3-, and O2 in the biofilms were measured by use of microsensors, and the spatial distributions of in situ nitrifying activities were determined. The relationship between the spatial organization of nitrifying bacterial populations and the in situ activity of these populations within the biofilms was discussed. Microelectrode measurements revealed that the active ammonia-oxidizing zone was vertically separated from the active nitrite-oxidizing zone. This vertical separation became more evident with increase of the substrate C/N ratio, leading to deterioration of nitrification efficiency. The combined use of these techniques made it possible to relate in situ nitrifying activity directly to the occurrence of nitrifying bacterial populations.

Flexible manufacturing systems and the internal structure of the firm

We investigate the relationship between the internal structure of the firm and the extent of flexibility of its technology. We demonstrate that increased vertical separation within the firm as implied, for instance, by subcontracting or by additional vertical layers of management yields investment in a more flexible technology. In contrast, increased horizontal separation as implied by lack of cooperation among different (horizontal) divisions within the firm has ambiguous implications on flexibility. When divisions of the organization confront significantly different levels of uncertainty, horizontal separation enhances technological flexibility. Otherwise, when the extent of uncertainty confronting different divisions is comparable it is cooperation that yields greater flexibility of the technology. We show that the attributes of the technology selected by a given firm may depend upon the internal structure of its competitor if those attributes can be observed by the competing firm. In particular, the firm chooses a less flexible technology if its competitor is vertically separated rather than integrated.