Comparing Competition and Regulated Monopoly in a Railway Market: An Agent-Based Modeling Approach

Authors

KRČÁL Ondřej

Year of publication 2014
Type Article in Proceedings
Conference Proceedings of the 18th International Conference Current Trends in Public Sector Research
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords open access; regulation; railway; welfare
Attached files
Description This paper introduces an agent-based model of a passenger railway line. The model is used for comparing the welfare of the railway market under unregulated duopoly and monopoly with maximum-price regulation. In the model, the railway operators gradually adjust passenger fares and eliminate train departures until the market reaches steady state. The paper analyses the steady-state data generated using two sets of parameter values. It finds that for most maximum-price levels, including the price that would be chosen by an unregulated monopoly, the total welfare in the monopolistic market is significantly lower compared to the duopoly market. However, there are some levels of maximum price which produce similar or even higher welfare than the duopoly market. The paper suggests that if correctly implemented, a simple maximum-price regulation may generate welfare outcomes comparable to competition.
Related projects:

You are running an old browser version. We recommend updating your browser to its latest version.