Towards a welfare enhancing process to manage railway infrastructure access

The European Commission has suggested that the use of scarce railway track capacity should be charged for on a marginal cost basis and that a welfare enhancing procedure to allocate capacity between competing operators is to be implemented. The present paper presents a practicable way to deal with these challenges. Two issues are at the analytical core of the problem. First, in order to prioritise, accurate information is required about the operators' willingness-to-pay for track access; to this end, an auctioning procedure has been developed. Secondly, an approach to handle the technically complex optimisation problem is needed so that ‘reasonably’ optimal allocations, given the ‘accurate’ information, can be established; dual optimisation is suggested as the remedy. Recent experiences from the US auctioning of radio-wave frequencies are cited as supporting evidence for the rationale of the approach.