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Competition in Swedish passenger railway: Entry in an open access market and its effect on prices
KTH, School of Architecture and the Built Environment (ABE), Transport Science. Statens väg- och transportforskningsinstitut.ORCID iD: 0000-0002-9219-8493
(English)In: Economics of Transportation, ISSN 2212-0122, E-ISSN 2212-0130Article in journal (Refereed) Accepted
Abstract [en]

The Swedish market for passenger railway services has been open to competition since the year 2010. Although minor entries have been made since this date, the incumbent SJ only faced substantial competition on the tracks when MTR entered the Stockholm-Gothenburg line in March 2015. Using unique Swedish ticket price data from operators’ websites, this paper investigates what effects this entry has had on market prices.

The results show that the incumbent’s prices decreased by 12.6 percent on average between March 2015 and June 2016. The price level of the competitor is well below the average price that was offered in the pre-entry period. Further, the largest price reduction, in percentage terms, was found on tickets booked 13 days before departure date. Finally, the observed price decrease in the paper is most likely at a short-run equilibrium, or an ongoing process, implying that prices might adjust further in the long-run.

Keywords [en]
Railway, Entry, Open access, Price competition, Web crawler
National Category
Economics Transport Systems and Logistics
Research subject
Transport Science
Identifiers
URN: urn:nbn:se:kth:diva-217266DOI: 10.1016/j.ecotra.2017.10.005OAI: oai:DiVA.org:kth-217266DiVA, id: diva2:1154878
Note

QC 20171107

Available from: 2017-11-06 Created: 2017-11-06 Last updated: 2017-11-07Bibliographically approved
In thesis
1. Competition in Public Transport: Essays on competitive tendering and open-access competition in Sweden
Open this publication in new window or tab >>Competition in Public Transport: Essays on competitive tendering and open-access competition in Sweden
2017 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The results of this work show that the cost efficiency of tendered bus services is similar across all Swedish counties, except for the more high-density counties where efficiency is lower. Considerably lower efficiency is also found for contracts with services run in-house by the Public Transport Authority (PTA), compared to when the same service is run by a private actor. With respect to the competitive environment, it was found that many contract design factors have little or no effect on the number of bids that the PTA sees in their tenders. No measure that could be imposed by a single PTA was found to increase the total number of bidders by more than 0.5 bidders. However, the results suggest that PTAs as a collective could try to avoid tendering too many contracts at the same time because this was shown to reduce participation by up to about two bidders. In addition, these studies show that the local competitive environment is important for the PTAs to consider. The way in which contract areas are defined will also affect the participation rate as operators were found to participate in tenders to a lower extent the farther their workplaces are from the contract area. While larger operators appear to be less sensitive with respect to such distances, the fact that smaller operators are, and that they often bid as one unit as members of cooperation companies, makes the competitive environment important. The results suggest that depots could be included in the contract to stimulate participation, but this is by no means the only nor an easy solution.

This thesis has also analyzed the entry made in 2015 by MTR Express (MTR) on the Stockholm-Gothenburg railway line. The overall conclusion is that customers are indeed facing lower prices one and a half years after the entry. MTR's prices are on average 100 SEK lower than the incumbent SJ's prices. Furthermore, the analysis shows that the incumbent’s prices have also gone down, by almost 13 percent, following the entry.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2017. p. 26
Series
TRITA-TSC-PHD ; 17-005
Keywords
Competition, Public Transport, Tendering, Procurement, Cost efficient, Bus, Railway, Open access competition
National Category
Transport Systems and Logistics Economics
Research subject
Transport Science
Identifiers
urn:nbn:se:kth:diva-217267 (URN)978-91-88537-05-8 (ISBN)
Public defence
2017-12-08, Kollegiesalen, Brinellvägen 8, Kungl Tekniska Högskolan, Stockholm, 14:00 (English)
Opponent
Supervisors
Note

QC 20171106

Available from: 2017-11-06 Created: 2017-11-06 Last updated: 2017-11-06Bibliographically approved

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Vigren, Andreas

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