Toc ’n’ Roll: Bargaining, Service Quality and Specificity in the UK Railway Network
AbstractThe paper studies the regulatory design in an industry where the regulated downstream provider of services to final consumers purchases the necessary inputs from an upstream supplier. The model is closely inspired by the UK regulatory mechanism for the railway network. Its philosophy is one of vertical separation between ownership and operation of the rolling stock: the Train Operating Company (TOC) leases from a ROlling Stock COmpany (ROSCO) the trains it uses in its franchise. This, we show, increases the flexibility and competitiveness of the network. On the other hand, it also reduces the specificity of the rolling stock, thus increasing the cost of running the service, and the TOC’s incentive to exert quality enhancing effort, thus reducing the utility of the final users. Our simple model shows that the UK regime of separation may in fact be preferable from a welfare viewpoint.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 09/7.
Date of creation: Feb 2009
Date of revision:
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Other versions of this item:
- Gianni De Fraja & Emanuela Michetti & Piercarlo Zanchettin, 2011. "Toc 'n' Roll: Bargaining, Service Quality and Specificity in the UK Railway Network," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 45(3), pages 383-414, September.
- De Fraja, Gianni & Michetti, Emanuela & Zanchettin, Piercarlo, 2008. "Toc 'n' Roll: Bargaining, Service Quality and Specificity in the UK Railway Network," CEPR Discussion Papers 7088, C.E.P.R. Discussion Papers.
- D2 - Microeconomics - - Production and Organizations
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L5 - Industrial Organization - - Regulation and Industrial Policy
- L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-14 (All new papers)
- NEP-NET-2009-03-14 (Network Economics)
- NEP-REG-2009-03-14 (Regulation)
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