Vertical relationships for the European railway industry

2001

Abstract A key question in the reform process of Europe's railway industry is the decision whether to opt for a market structure that vertically integrates infrastructure and operations, or for one that separates them. In making this decision, knowledge of the relationship between operating costs and the infrastructure is fundamental. For this purpose a translogarithmic cost function is estimated, including the multi-product nature of railway companies and a measurement of the value of the infrastructure. The results show that costs deriving from freight transport and from the infrastructure are complementary, while those deriving from passenger transport and from the infrastructure are sub…