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
Date Written: March 5, 2013
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
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