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Horizontal versus vertical separation in railway networks: Implications for network quality

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  • Cui, Shana
  • Besanko, David

Abstract

This paper analyzes the relationship between network quality and organizational structure in railway systems. We consider two options: vertical separation and horizontal separation. We derive the Nash equilibrium network qualities in a two-stage game. In general, the comparison of network quality between the two organizational structures is ambiguous. However, unless the regulated access fee under vertical separation is sufficiently large, horizontal separation is likely to dominate vertical separation. This is reinforced if horizontal separation enables service complementarities.

Suggested Citation

  • Cui, Shana & Besanko, David, 2016. "Horizontal versus vertical separation in railway networks: Implications for network quality," Economics Letters, Elsevier, vol. 138(C), pages 78-80.
    • Handle: RePEc:eee:ecolet:v:138:y:2016:i:c:p:78-80
    DOI: 10.1016/j.econlet.2015.12.001
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    References listed on IDEAS

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    1. Haucap, Justus & Klein, Gordon J., 2012. "How regulation affects network and service quality in related markets," Economics Letters, Elsevier, vol. 117(2), pages 521-524.
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    Cited by:

    1. Mizutani, Fumitoshi, 2020. "A comparison of vertical structural types in the railway industry: A simple mathematical explanation model," Research in Transportation Economics, Elsevier, vol. 81(C).
    2. Zong, Yueqi & Wu, Jianhong & Yu, Kemei & Yang, Xutao, 2023. "Efficiency benchmarking and its determinants in high-speed railways: Reference for China," Research in Transportation Economics, Elsevier, vol. 102(C).
    3. Carlos Gutiérrez-Hita & Aurora Ruiz-Rua, 2019. "Competition in the railway passenger market: The challenge of liberalization," Competition and Regulation in Network Industries, , vol. 20(2), pages 164-183, June.
    4. Yu, Kemei & Wu, Jianhong & Wang, Kun & Zhang, Anming & Zheng, Shiyuan & Wang, Yixiao & Li, Hongchang, 2023. "Restructuring Chinese railways from a cost-efficient perspective—A hedonic cost function analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 177(C).
    5. Cui, Shana & Pittman, Russell & Zhao, Jian, 2018. "Restructuring the Chinese Freight Railway: Two Scenarios," MPRA Paper 88407, University Library of Munich, Germany.

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