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The Fehmarn Belt Duopoly - Can the Ferry Compete with a Tunnel?

DIW Berlin Discussion Paper No. 1539

15 Pages Posted: 14 Jan 2016

See all articles by Rafael Aigner

Rafael Aigner

University of Bonn - The Bonn Graduate School of Economics

Date Written: January 2016

Abstract

The Fehmarn Belt is a strait between Denmark and Germany, currently served by a ferry. This note analyses the theory of competition between the ferry and a planned tunnel, the Fehmarn Belt Fixed Link. The model is an asymmetric duopoly and addresses 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?

To complement the theoretical analysis, the note provides results of a numerical application.

Keywords: Fehmarn Belt Fixed Link, transportation economics, competition analysis, route choice, asymmetric duopoly

JEL Classification: R42, D43, L91

Suggested Citation

Aigner, Rafael, The Fehmarn Belt Duopoly - Can the Ferry Compete with a Tunnel? (January 2016). DIW Berlin Discussion Paper No. 1539, Available at SSRN: https://ssrn.com/abstract=2714785 or http://dx.doi.org/10.2139/ssrn.2714785

Rafael Aigner (Contact Author)

University of Bonn - The Bonn Graduate School of Economics ( email )

Adenauerallee 24-26
Bonn, D-53113
Germany

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