Railway Competition in a Park-and-Ride System

Summary

The scale effect of city size and the cost advantage of railway over automobile use are examined for a simple park-and-ride commuter system. The main result is that the operation constraint (i.e., the budget constraint for a rail company) is more restrictive for a monopolistic competition equilibrium than for a kinked one. Hence, it is easily possible to construct a case in which the perverse characteristics of kinked equilibrium, e.g., “the larger a city, the greater the number of railways, and the higher the fare is,” could result in a troublesome situation for a park-and-ride system. In addition, the operational constraints might be most restrictive for the social optimal configuration rather than for other market solutions. As a result, railway subsidies may be necessary to balance the budget for a better configuration.