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Structural Separation to Create Competition? The Case of Freight Railways

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  • Pittman Russell

    ()
    (Antitrust Division, US Department of Justice, and New Economic School, Moscow)

Abstract

The freight railways sector has three attributes that have proved problematic for recent experiments with vertical separation: a) a relatively high share of network costs in total delivered service costs, b) an apparent persistence of economies of scale at the "competitive" train operations level, and, perhaps most important, c) strong economies of vertical integration that are focused on the interface point of wheel and rail – that is, exactly where vertical separation takes place. The third factor in particular seems a clear illustration of the rationales discussed by Coase and Williamson for the broad vertical scope of a single firm and the disadvantages of relying on market transactions under certain conditions.

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Bibliographic Info

Article provided by De Gruyter in its journal Review of Network Economics.

Volume (Year): 4 (2005)
Issue (Month): 3 (September)
Pages: 1-16

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Handle: RePEc:bpj:rneart:v:4:y:2005:i:3:n:1

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Cited by:
  1. Sandra Jódar-Rosell & Jordi Gual, 2010. "The Strange Couple: Regulation and Competition Policy in Network Industries," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 8(3), pages 19-23, October.
  2. Christiaan Hogendorn, 2003. "Excessive(?) Entry of National Telecom Networks, 1990-2001," Working Papers 03-07, NET Institute.
  3. Merkert, Rico, 2010. "Changes in transaction costs over time - The case of franchised train operating firms in Britain," Research in Transportation Economics, Elsevier, vol. 29(1), pages 52-59.
  4. Ricardo Gonçalves & Álvaro Nascimento, 2009. "The momentum for network separation: a guide for regulators," Working Papers de Economia (Economics Working Papers) 03, Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto).
  5. Russell Pittman, 2009. "Competition Issues in Restructuring Ports and Railways, Including Brief Consideration of these Sectors in India," EAG Discussions Papers 200906, Department of Justice, Antitrust Division.
  6. Brennan, Timothy, 2005. "Alleged Transmission Undersupply: Is Restructuring the Cure or the Cause?," Discussion Papers dp-05-50, Resources For the Future.
  7. Thomas Ehrmann & Karl-Hans Hartwig & Torsten Marner & Hendrik Schmale, 2009. "Specific Investments and Ownership Structures in Railways – An Experimental Analysis," Working Papers 12, Institute of Transport Economics, University of Muenster.
  8. Christian Growitsch & Heike Wetzel, 2006. "Economies of Scope in European Railways: An Efficiency Analysis," Working Paper Series in Economics 29, University of Lüneburg, Institute of Economics.
  9. Merkert, Rico & Nash, Chris A., 2013. "Investigating European railway managers’ perception of transaction costs at the train operation/infrastructure interface," Transportation Research Part A: Policy and Practice, Elsevier, vol. 54(C), pages 14-25.
  10. R. Pittman, 2009. "Railway Mergers and Railway Alliances: Competition Issues and Lessons for Other Network Industries," Competition and Regulation in Network Industries, Intersentia, vol. 10(3), pages 259-279, September.
  11. Pittman, Russell, 2011. "Risk-averse restructuring of freight railways in China," Utilities Policy, Elsevier, vol. 19(3), pages 152-160.
  12. Fumitoshi Mizutani & Shuji Uranishi, 2013. "Does vertical separation reduce cost? An empirical analysis of the rail industry in European and East Asian OECD Countries," Journal of Regulatory Economics, Springer, vol. 43(1), pages 31-59, January.
  13. Rafael Lalive & Armin Schmutzler, 2005. "Exploring the Effects of Competition for Railway Markets," SOI - Working Papers 0511, Socioeconomic Institute - University of Zurich, revised Apr 2007.

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