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Entry and competition in freight transport: the case of a prospective transalpine rail link between France and Italy

  • Prady, Delphine
  • Ullrich, Hannes

We analyze the expected effects of building a rail tunnel between Lyon and Turin on i) the market shares of the established and the new suppliers, and ii) consumer surplus. The prospective project consists of a 53km rail tunnel providing freight shippers with a new alpine path. We calibrate an equilibrium model where freight shippers choose a mode and alpine path to ship goods from a given origin to a given destination. Freight carriers strategically set prices for the differentiated products they supply. Deriving the market equilibrium, we simulate the entry of a quality-improved product and test its competitive viability. The prospective alpine path proves both competitive and welfare-enhancing on the regional market, loses its competitive edge on the wider North-South market, and leads to a modal shift on the West-East market. We argue that the new infrastructure is only one tool out of a global modal shift-oriented policy toolbox.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 10-010.

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Date of creation: 2010
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Handle: RePEc:zbw:zewdip:10010
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