IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Specific Investments and Ownership Structures in Railways – An Experimental Analysis

  • Thomas Ehrmann

    ()

    (Institute of Strategic Management, Muenster)

  • Karl-Hans Hartwig

    ()

    (Institute of Transport Economics, Muenster)

  • Torsten Marner

    ()

    (Institute of Transport Economics, Muenster)

  • Hendrik Schmale

    ()

    (Institute of Strategic Management, Muenster)

We analyze the impact of different organizational structures on incentives to invest in railways: vertical integration, vertical separation, and a hybrid form. Economic theory predicts that vertical integration fosters socially optimal investment, whereas, due to potential hold-up problems, both vertical separation and hybrid forms cause severe underinvestment. We test these theoretical predictions in a laboratory experiment and find evidence that, in a vertically integrated environment, the level of investment in rolling stock and in rail infrastructure is roughly socially optimal. The complete absence of a discrepancy in our experimental results between vertical separation and the hybrid organisational structure, contradicting the predictions of model-theory, is surprising and can be attributed to the relatively high investments in the separated model. This contradiction might also be explained by the existence of social preferences.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.wiwi.uni-muenster.de/ivm/materialien/forschen/veroeffentlichungen/Diskussionspapier12.pdf
File Function: First version, 2009
Download Restriction: no

Paper provided by Institute of Transport Economics, University of Muenster in its series Working Papers with number 12.

as
in new window

Length: 34 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:mut:wpaper:12
Contact details of provider: Postal: Universitätsstr. 14-16, 48143 Münster
Phone: 02 51 / 83-2 29 10
Fax: 02 51 / 83-2 83 99
Web page: http://www.wiwi.uni-muenster.de/ivm/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Oliver Hart & John Moore, 1985. "Incomplete Contracts and Renegotiation," Working papers 367, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Friebel, Guido & Ivaldi, Marc & Vibes, Catherine, 2003. "Railway (De) Regulation : A European Efficiency Comparison," IDEI Working Papers 221, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2007.
  3. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  4. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  5. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  6. Dominique Bouf & Yves Crozet & Julien Lévêque, 2005. "Vertical separation, disputes resolution and competition in railway industry," Post-Print halshs-00092434, HAL.
  7. Link, Heike & Nilsson, Jan-Eric, 2005. "Infrastructure," Research in Transportation Economics, Elsevier, vol. 14(1), pages 49-83, January.
  8. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Cantos, Pedro & Campos, Javier, 2005. "Recent changes in the global rail industry: facing the challenge of increased flexibility," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 29, pages 1-21.
  10. Crocker, K.J. & Masten, S.E., 1988. "Pretia Ex Machina?: Prices And Process In Long-Term Contracts," Papers 10-88-2, Pennsylvania State - Department of Economics.
  11. Hackett, Steven C, 1993. "Incomplete Contracting: A Laboratory Experimental Analysis," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 274-97, April.
  12. Christian Growitsch & Heike Wetzel, 2007. "Testing for Economies of Scope in European Railways: An Efficiency Analysis," Working Paper Series in Economics 72, University of Lüneburg, Institute of Economics.
  13. Eric Maskin & John Moore, 1999. "Implementation and Renegotiation," Harvard Institute of Economic Research Working Papers 1863, Harvard - Institute of Economic Research.
  14. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  15. Cantos Sánchez, P., 2001. "Vertical relationships for the European railway industry," Transport Policy, Elsevier, vol. 8(2), pages 77-83, April.
  16. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
  17. Randolph Sloof, 2005. "Finite Horizon Bargaining With Outside Options And Threat Points," Theory and Decision, Springer, vol. 57(2), pages 109-142, 03.
  18. John D. Bitzan, 2003. "Railroad Costs and Competition: The Implications of Introducing Competition to Railroad Networks," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 37(2), pages 201-225, May.
  19. Smirnov, V. & Wait, A., 2001. "Hold-up and Sequential Specific Investments," Department of Economics - Working Papers Series 807, The University of Melbourne.
  20. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  21. Pittman Russell, 2005. "Structural Separation to Create Competition? The Case of Freight Railways," Review of Network Economics, De Gruyter, vol. 4(3), pages 1-16, September.
  22. Ginés de Rus & Gustavo Nombela, 2007. "Is Investment in High Speed Rail Socially Profitable?," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 41(1), pages 3-23, January.
  23. Chris Nash, 2005. "Rail Infrastructure Charges in Europe," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 39(3), pages 259-278, September.
  24. Russell Pittman, 2007. "Make or buy on the Russian railway? Coase, Williamson, and Tsar Nicholas II," Economic Change and Restructuring, Springer, vol. 40(3), pages 207-221, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mut:wpaper:12. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Birgit Rueschenschmidt)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.