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Structural Separation and Access Pricing in the Railways Sector: Sauce for the Goose Only?

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Document pages: 17 pages

Abstract: The freight railways sector has three attributes that have proved problematic for recent experiments with vertical separation: a) a relatively high share of network costs in total delivered service costs, b) an apparent persistence of economies of scale at the "competitive " train operations level, and, perhaps most important, c) strong economies of vertical integration that are focused on the interface point of wheel and rail - i.e., exactly where vertical separation takes place. The third factor in particular seems a clear illustration of the rationales discussed by Coase and Williamson for the broad vertical scope of a single firm and the disadvantages of relying on market transactions under certain conditions.

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