Railway liberalization, airport congestion toll, and infrastructure pricing: Modelling and numerical analysis for European and Chinese markets

Regulation on infrastructure pricing affects various aspects, including demand, social welfare, and investment in transport management, as well as intramodal and intermodal competition. This study develops a game theoretic model that derives the charges (set by the infrastructure operators) and fare prices (set by the transport operators) as well as the associated profit and welfare in equilibrium. Key analytical insights concern the joint effect of the product differentiation by the transport operators and profit/welfare orientation of the infrastructure operators. If the transport operator implements more differentiation between air and HSR, or the infrastructure operators are more profit-oriented, the transport mode becomes less sensitive to the access charge from the competing mode, but more sensitive to the access charge from the same mode. Furthermore, using publicly available data for European and Chinese markets, we investigate the effects of introducing HSR on-track competition and congested infrastructures through numerical studies. Key findings are that entry by an incumbent-owned compared to a privately-owned HSR generates more industry benefits but leads to a significant reduction in consumer surplus. A more profit-oriented airport operator leads to increased total welfare if congestion is sufficient high. Theoretical and policy insights are provided.