An analysis of the competition that impinges on the Milan–Rome intercity passenger transport link

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An analysis of the competition that impinges on the Milan–Rome intercity passenger transport link

Mancuso, Paolo

Abstract This paper presents a simulation based on the discrete choice model, and a limited set of data to analyse the passenger market on the Milan–Rome intercity transport link. Considered in the analysis are market shares of both incumbents and new entrants, as well as consumer surplus and environmental costs. The link, which is the second largest intra-European connection, has been characterized by a low degree of competition in both rail and air transport services. The entry of new rail and air operators in 2012, however, will likely reshape market characteristics. The current paper argues the following: (i) most of the benefit in consumer surplus will stem from the introduction of competition in high speed rail; (ii) increased connections will result in increased environmental costs, which will partially offset the larger consumer surplus; and (iii) a reduction in the difference between airline and rail companies involving the costs of infrastructure access and security could lead to more fair forms of competition between airline and rail companies, but it generates a worst environment state.

Highlights • Most of the benefit in consumer surplus will stem from the introduction of competition in high speed rail. • The increase of the frequency of the connection raises the environmental costs. • The government surcharges could be cause a negative impact on competition and environmental costs • The Ivaldi and Vibes' algorithm has been modified allowing to identify a reference price whenever minimum and the maximum prices are available.