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Assessing the Efficient Cost of Sustaining Britain's Rail Network: Perspectives based on Zonal Comparisons

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  • John Kennedy
  • Andrew S. J. Smith

Abstract

The objective of this paper is to inform the debate on how efficiency targets for Network Rail (formerly Railtrack) should be set during the 2002/03 Interim Review and beyond. Given the problems experienced during the 2000 Periodic Review, which focused on external benchmarks, we propose an internal benchmarking approach, drawing on data for seven geographical zones within Railtrack. Our approach mirrors the yardstick competition method used in other UK regulated industries. Two efficiency measurement techniques are applied to this data. Our results suggest that Railtrack (as a whole) delivered substantial real unit cost reductions in the early years after privatisation, although these savings were largely offset by the post-Hatfield cost increases. However, looking forward, zonal efficiency differences suggest that the company could make significant savings in future years by applying best practice consistently across the network. © The London School of Economics and the University of Bath 2004

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  • John Kennedy & Andrew S. J. Smith, 2004. "Assessing the Efficient Cost of Sustaining Britain's Rail Network: Perspectives based on Zonal Comparisons," Journal of Transport Economics and Policy, University of Bath, vol. 38(2), pages 157-190, May.
    • Handle: RePEc:tpe:jtecpo:v:38:y:2004:i:2:p:157-190
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    Cited by:

    1. Abate, Megersa & Lijesen, Mark & Pels, Eric & Roelevelt, Adriaan, 2013. "The impact of reliability on the productivity of railroad companies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 51(C), pages 41-49.
    2. Gillies-Smith, Andrew & Wheat, Phill, 2016. "Do network industries plan to eliminate inefficiencies in response to regulatory pressure? The case of railways in Great Britain," Utilities Policy, Elsevier, vol. 43(PB), pages 165-173.
    3. Smith, Andrew S.J., 2012. "The application of stochastic frontier panel models in economic regulation: Experience from the European rail sector," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(2), pages 503-515.
    4. Smith, Andrew S.J., 2005. "The role of efficiency estimates in UK regulatory price reviews: The case of rail," Utilities Policy, Elsevier, vol. 13(4), pages 294-301, December.
    5. Smith, Andrew S.J. & Ojeda Cabral, Manuel, 2022. "Is higher quality always costly? Marginal costs of quality: Theory and application to railway punctuality," Transportation Research Part A: Policy and Practice, Elsevier, vol. 157(C), pages 258-273.
    6. Andersson, Mats, 2007. "Fixed Effects Estimation of Marginal Railway Infrastructure Costs in Sweden," Working Papers 2007:11, Swedish National Road & Transport Research Institute (VTI).
    7. Odolinski, Kristofer & Smith, Andrew S.J., 2014. "Assessing the Cost Impact of Competitive Tendering in Rail Infrastructure Maintenance Services: Evidence from the Swedish Reforms (1999 to 2011)," Working papers in Transport Economics 2014:17, CTS - Centre for Transport Studies Stockholm (KTH and VTI), revised 22 May 2015.
    8. Andersson, Mats, 2006. "Marginal railway infrastructure cost estimates in the presence of unobserved effects," Working Papers 2006:6, Swedish National Road & Transport Research Institute (VTI).

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