Entry and Competition in Freight Transport: The Case of a Prospective Transalpine Rail Link Between France and Italy
Toulouse School of Economics (TSE)
University of Zurich - Faculty of Economics, Business Administration and Information Technology
March 5, 2013
ZEW - Centre for European Economic Research Discussion Paper No. 10-010
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.
Number of Pages in PDF File: 26
Keywords: Transalpine freight, New rail infrastructure, Simulation model, Competition
JEL Classification: R41, L92, H54, L13, C63working papers series
Date posted: April 15, 2010 ; Last revised: March 7, 2013
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