Overview market-can-bear studies
Market-can-bear tests have been carried out in recent years in several countries (e.g. Germany, The Netherlands, Austria) to determine a part (the so-called ‘mark-up’) of the price that rail infrastructure providers charge for the use of the rail.
On the basis of EU-Directive 2012/34/EU and corresponding national legislation, rail infrastructure companies in Europe levy a charge on the rail operators for the use of the infrastructure. In this way, the rail operators pay for the direct costs. On top of this, member states also have the possibility to levy a markup, which according to the Directive should be based on „what the market can bear“.
A method which can be applied to determine what the market can bear is the Ramsey-Boiteux-Principle). This principle implies that the mark-up for a market segment should be inversely proportional to the own price elasticity for this market segment: segments with a large sensitivity to a price change pay a smaller mark-up and segments that are more insensitive pay a higher markup.
Several member states in Europe are applying the market-can-bear principle for levying markups on rail transport providers, or are planning to do so in the near future. In order to calculate the Ramsey-Boiteux markup, it is important for rail infrastructure companies to determine price elasticities of demand for rail transport by market segment. Demand here refers to the demand by final consumers of rail transport services: travellers in passenger transport and shippers and logistics service providers in freight transport. The rail operator is the link between the rail infrastructure company and the final consumer, and often the assumption is made that the extra charges will be passed on by the rail operator to the final consumer.
Price elasticities of demand for rail transport by these agents can be determined using three different methods:
- Identify the price elasticities using existing transport models for the study area in question. For the Dutch rail infrastructure provider ProRail, Significance has carried out simulations with the national passenger transport model LMS and the freight transport model BasGoed. The resulting elasticities and mark-ups, as well as the methods used to derive these, have been approved by The Netherlands Authority for Consumers and Markets (ACM).
- Develop new transport models on available or new data. The data might involve stated preference (SP) experiments, where respondents are asked to choose between hypothetical alternatives. Significance has applied this method for passenger and freight transport in Austria in a project for ÖBB Infrastruktur AG.
Base the elasticities for a certain study area on a review of the literature on elasticities in freight and/or passenger transport. Here it is important to select those studies that are most transferable to the study area and the market segments studied.
