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The Fehmarn Belt duopoly – Can the ferry compete with a tunnel?

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  • Aigner, Rafael
  • Weber, Katharina

Abstract

The Fehmarn Belt is a strait between Denmark and Germany, currently served by a ferry operator. We analyse competition between the ferry service and a planned tunnel, the Fehmarn Belt Fixed Link. We develop a differentiated duopoly model to address two questions: 1. Will the tunnel induce the ferry to exit the market once it operates? 2. Will the tunnel’s toll revenue suffice to cover its cost? Using real-world data and traffic forecasts, we show that it should not be taken for granted that the ferry will exit the market, and that if the ferry competes, the tunnel project will make a loss.

Suggested Citation

  • Aigner, Rafael & Weber, Katharina, 2017. "The Fehmarn Belt duopoly – Can the ferry compete with a tunnel?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 100(C), pages 1-15.
  • Handle: RePEc:eee:transa:v:100:y:2017:i:c:p:1-15
    DOI: 10.1016/j.tra.2017.03.006
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    Keywords

    Fehmarn Belt Fixed Link; Transportation economics; Competition analysis; Route choice; Duopoly; Product differentiation;

    JEL classification:

    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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