AN ANALYSIS OF THE RAIL TRANSPORT SYSTEM. IN: RAILWAYS

This paper discusses the pricing policy for rail transportation as a whole in Sweden, which was the first country to separate rail track planning and operation from the provision of rail transport services. When the separation was planned, the idea was that rail and road infrastructure were now treated on an equal footing, with marginal cost pricing and cost-benefit analysis applied to both. The authors of the current paper point out the crucial differences in the pricing policy of a rail transport system compared to a road transport system. They describe the theoretical basis for a comprehensive rail transport cost analysis, considering both the short-run and long-run cost structure. Short-run price-relevant marginal costs are categorized, and short-run cost and output relationships are discussed. Rail track wear-and-tear, accidents and the level and structure of the price-relevant costs of rail transport services are given special attention. Total cost allocation and long-run marginal cost approaches to costing and pricing are repudiated. The analysis of the structure of rail transportation costs and track costs indicates that there is only one more dramatic change has to be made in order to improve allocative efficiency: train operators need to adopt peak load (market) pricing instead of traditional distance-based fare structures.