Entry and Competition in Freight Transport: The Case of a Prospective Transalpine Rail Link Between France and Italy

26 Pages Posted: 15 Apr 2010 Last revised: 7 Mar 2013

Delphine Prady

Toulouse School of Economics (TSE)

Hannes Ullrich

University of Zurich - Faculty of Economics, Business Administration and Information Technology; German Institute for Economic Research (DIW Berlin) - Innovation, Management, Service

Date Written: March 5, 2013

Abstract

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.

Keywords: Transalpine freight, New rail infrastructure, Simulation model, Competition

JEL Classification: R41, L92, H54, L13, C63

Suggested Citation

Prady, Delphine and Ullrich, Hannes, Entry and Competition in Freight Transport: The Case of a Prospective Transalpine Rail Link Between France and Italy (March 5, 2013). ZEW - Centre for European Economic Research Discussion Paper No. 10-010. Available at SSRN: https://ssrn.com/abstract=1589527 or http://dx.doi.org/10.2139/ssrn.1589527

Delphine Prady

Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France
+33688484233 (Phone)

Hannes Ullrich (Contact Author)

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Plattenstrasse 14
Zurich, 8032
Switzerland

German Institute for Economic Research (DIW Berlin) - Innovation, Management, Service ( email )

Mohrenstra├če 58
Berlin, 10117
Germany
+493089789521 (Phone)

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