Towards a liberalised European high speed railway sector: Analysis and modelling of competition using Game Theory

Abstract

Introduction: The liberalisation of the Railways imposed by European Directives introduces competition in a sector traditionally organised largely through national monopolies. As a result, the analysis of the competition particularly on a given route is very recent. Approach: The approach and methodologies so far developed to analyse the competition between European rail operators have resulted in interesting but isolated efforts. Developments based on game theory and analysis of strategic decision as part of the organisational economics theory have proven to be the most appropriate. This paper introduces an improvement on these methodologies by using the principles of consumer behaviour theory and the analysis capabilities of game theory to develop a dedicated purpose-built modelling tool for the analysis of intermodal competition within the operator's revenue function. To validate the model, a forecast analysis on the Madrid-Barcelona high speed corridor has been performed. Conclusions: The resulting model allows quantifying the minimum requirements for a new operator to stay in the market as well as the equilibrium price and level of investment required. © 2012 The Author(s).