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Economic Regulation of Railways in Logistics Chains: A Problem Looking for a Solution or a Solution Looking for a Problem?

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Document pages: 15 pages

Abstract: The economic regulation of railway infrastructure in Australia covers all links which are part of the interconnected rail system in Australia, since such infrastructure represents a natural monopoly. However, railways form part of logistics chains and the extent to which monopoly power can meaningfully be exercised is dependent on the nature and extent of rents available within the final consumption market each logistics chain serves. This paper identifies three distinct types of rents and analyses the incentives of a railway infrastructure owner in the presence of each. It then examines the major haulage tasks of Australian railways to ascertain whether the relevant railway infrastructure owner has both the incentives and the ability to make anticompetitive gains from the exploitation of its natural monopoly position. In most cases, it finds that they do not.

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