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Competition in rail freight markets : economics of open access

This research examines the role played by Open Access entry as a strategy for promoting competition in UK rail freight markets. The theoretical basis for such an investigation is that associated with contestable markets in Economics and more specifically in the promotion of competition in related markets. The overall aims of the research are to first understand the contestability of the UK rail freight market against the background of its underlying market conditions. Secondly, the research compares the experience of Open Access rail freight operators in an international context in order to confirm or reject the explanatory relevance of key variables, as postulated by economists. The research aims have been satisfied in each case through the attainment of a number of specific objectives. These objectives include gaining a wider understanding of the theory of contestable markets, identifying and evaluating a range of barriers to entry faced by Open Access operators (and the strategies they have employed to overcome them), and an appreciation of the factors and processes that determine Open Access activity. The qualitative line of enquiry adopted by the research has produced a review of relevant literature sources and a series of preliminary interviews with industry experts. The former facilitated an in - depth understanding of the characteristics of UK rail freight markets and of the theory of contestability, with a priori reasoning being employed to highlight key issues and controversies. The interviews with key industry experts formed the basis for a subsequent questionnaire survey of members of the Rail Freight Group and other rail industry members. Although most respondents believed that a significant number of barriers to entry existed (with EW&S' first choice over traction being regarded as the most important both in terms of citations and barrier height), 68% of those surveyed thought that there would be some Open Access entry in the first eighteen months after the privatisation of British Rail's trainload freight 1 operations. Sub - contracting of rail haulage was regarded as the most likely modus operandi for new market entrants. This survey was followed up by case studies of the first two instances of Open Access entry (National Power and BNFL), which had both shown considerable interest in the issues raised by the earlier industry survey. These case studies resulted in the identification of a range of similarities and contrasts in barriers encountered and entry strategies, and provided valuable information about the rail freight operations of the two companies. Further analysis has compared entry in an international context and identified strategies that could complement existing practice in the UK. For this purpose, an analytical framework based on a number of themes of Open Access is adopted. Perceptions of regulatory effectiveness in promoting contestable outcomes are also established through a series of in - depth interviews with key industry players. The research project has generated a number of successful outcomes relating to its aims. Markets are not contestable and contestability should not be regarded as an appropriate framework for analysing industry behaviour. This outcome is the result of an awareness of those factors representing barriers to entry and of those structural complexities accounting for a lack of Open Access entry. An understanding of the relative significance of entry barriers and of strategies adopted by operators has also been achieved, along with awareness of those factors and strategies regarded by them as important. The extent to which certain Open Access variables retain their explanatory power in a global context and the scope for utilising entry strategies used elsewhere (such as short - lines) has also been established, along with an awareness of the opinions of key industry players as to the effectiveness of regulatory intervention in the promotion of greater contestability. 11 Overall, this research project has provided valuable insight into the likelihood of Open Access competition in rail freight markets. In addition, it has led to a recognition of the considerable opportunities that now exist for further work on Open Access entry in rail freight markets, both domestically and internationally.
Date January 2000
CreatorsBrewer, Peter Read
PublisherUniversity of Huddersfield
Source SetsEthos UK
Detected LanguageEnglish
TypeElectronic Thesis or Dissertation

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