Economies of Scale and Railways Infrastructure Pricing: Empiricism and Criticism



Economies of Scale and Railways Infrastructure Pricing: Empiricism and Criticism

Authors

RAICU S and OLARU D, "Politehnica" University of Bucharest, Romania

Description

In the last decade there has been a re-thinking of the way of charging the railway infrastructure because of its special features, of the damages provoked by the infrastructt~re projects, because of congestion - neglected much time, and of the powerful mo

Abstract

In the last decade there has been a re-thinking of the way of charging the railway infrastructure because of its special features, of the damages provoked by the infrastructt~re projects, because of congestion - neglected much time, and of the powerful modifications experienced by the agents (especially the European railways) - the accounting and institutionally separation between infrastructure and operation.

The economic literature agrees that the marginal social cost pricing is the best solution for charging. Under constant returns of scale in the provision of capacity, and if capacity is perfectly divisible, application of the optimal pricing rule will yield total revenues, which just cover total costs. But this is not Re case of railways, where the second best rule reflect the intricate nature and magnitude of the pricing distortion. With a coarse two-part tariff structure (with variable fee equal to variable costs and fixed fee equal to user fixed costs) the outcome will depend upon the returns of scale. The evaluation of the alternative pricing solutions seems to show that the efficiency calls the use of a mix of charging methods (e.g., average costs prices for passenger transport, and marginal costs for freight - the average cost charges will result in overpricing under-utilized ir~astmcture and underpricing over-utilized sections).

The paper analyzes the relationships among costs, elasticities, economies of scale, with reference to Romanian Railways, and proposes some alternatives of in~astmcture charging, correspondent with the variations of demand on capacity and its characteristics.

Publisher

Association for European Transport