Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Tuesday, March 30, 2010

Entry and competition in freight transport: the case of a prospective transalpine rail link between France and Italy

Posted by D. Daniel Sokol

Delphine Prady (Tolouse - Econ) and Hannes Ullrich (U Zurich and ZEW Manheim) address Entry and competition in freight transport: the case of a prospective transalpine rail link between France and Italy.

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 p! olicy toolbox.

http://lawprofessors.typepad.com/antitrustprof_blog/2010/03/entry-and-competition-in-freight-transport-the-case-of-a-prospective-transalpine-rail-link-between-f.html

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