An empirical study on the transaction sector within rail firms

Abstract

In general, there is a growing debate on transaction costs in regard to vertical separation of rail infrastructure from train operations, but there is still only little or almost no systematic work on their measurement in railways. This article applies a top–down approach to transaction cost measurement to reveal the size of the transaction sector within train operation and rail infrastructure firms. It aims to estimate the resulting transaction costs and their share in total operating costs for the first time. The results reveal differences in the relative size of the transaction sector at the firm level, supporting, in general, the argument that complete vertical separation results in relatively higher transaction costs. However, their level is substantially less decisive than suggested by earlier studies and the lower transaction costs of partially integrated rail firms are to some extent offset by more parent company support and the level of rail system-wide transaction costs.