Investigating the market share convergence and welfare potentials of asymmetric train access charges for the commercial passenger rail services

Abstract

A recent market liberalisation of commercial passenger rail services since 2020 has brought a new era for long-distance transport in the EU. However, drawing from the experiences of countries with unsuccessful entry attempts, we investigate the effects of asymmetric train access charges (TAC). Asymmetric access regulation is based on lower access charges for entrants than for incumbents for a limited period in order to induce convergence of railway undertakings' (RU) market shares. Intending to compare the effects of symmetric and asymmetric TAC, we model oligopoly competition in the number of offered seats between the incumbent (Inoui) and entrant (Trenitalia) on the Paris–Lyon line, the first case of asymmetric TAC regulation on railways. In the first year of competition, consumer surplus, entrant's profit, and total welfare without infrastructure manager's profit increased with asymmetric TAC compared to symmetric TAC without discounts. As the discount for entrant diminishes over time, all previous welfare elements monotonically decline. By introducing new departures and running double trainsets, the entrant can reverse this monotonically declining trend. This implies that asymmetric TAC should provide additional incentives for entrants to increase their frequency and number of offered seats.