Priority Rules Versus Scarcity Premiums in Rail Markets

The regulation of rail network access is a key component of the EU policy that aims to strengthen rail markets. Two specific regulations are proposed: (i) a priority for long-distance (freight) services and (ii) a scarcity premium. Based on a congested network with two rail links, numerical simulations demonstrate that total surplus can be greater under the priority rule, which depends on the network charge per train-kilometer. Consumer surplus, on the other hand, is always greater under the priority rule, while fixed network-cost recovery is easier to achieve if a scarcity premium exists.