For many years, the Dutch Railways (NS) had a monopoly of the heavy rail passenger transport. Because the Dutch government deregulated the railway sector approximately two years ago, a second carrier, Lovers Rail, entered that market. In economic literature, it is well known that railways presented the most difficult problem for deregulation, since they included some vestigial elements of natural monopoly, for instance, they are decreasing cost industries, namely that in the long run, unit costs decrease as output increases or vice versa. Therefore, the provision of those rail transport services by one carrier would be preferred. The question is whether after introduction of competition in the railway sector, NS will be motivated to work more efficiently, or whether competition will cause ineffectiveness, so that in the long run, the passenger will be the victim. In this paper, it is attempted to give an answer to the question whether NS is in fact still a natural monopoly, especially now that the Dutch government is responsible for the provision and maintenance of rail infrastructure. (A)
Abstract