Subadditivity Tests for Network Separation With an Application to US Railroads

In this discussion paper, the authors describe a pair of subadditivity tests that can be used to evaluate the technological feasibility of separating a vertically integrated network monopoly into a common infrastructure component and competing operating components. The authors implement the tests with a Generalized McFadden cost function that is globally concave in input prices and permits the assignment of zero output values without losing its flexibility properties. The tests shed light on the respective roles of regulation and competition policy. The authors illustrate how these tests can be used with an analysis of United States freight railroads for the period 1978 - 2001; both vertical and horizontal economies of scope were found.

  • Corporate Authors:

    Centre for Economic Policy Research

    90-98 Goswell Road
    London,   United Kingdom  EC1V 7RR
  • Authors:
    • Ivaldi, Marc
    • McCullough, Gerard J
  • Publication Date: 2004

Language

  • English

Media Info

  • Media Type: Print

Subject/Index Terms

Filing Info

  • Accession Number: 01003452
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Aug 30 2005 11:33AM