Could Prices or Auctions Be Used to Allocate Rail Network Capacity?
In theory, a variety of market mechanisms can be considered potential candidates for allocating capacity where there is excess demand for train paths. In broad terms, these approaches involve either (1) pricing, that is, some form of pre-determined tariff so that train operators can calculate how much it would cost them to run a particular service or (2) auctions, a process whereby train operators can indicate the value that they attach to particular train paths, thereby revealing the allocation that generates the highest value. In practice, except in extremely simple cases, it is highly unlikely that either approach could be used to efficiently allocate scarce rail network capacity. Whereas the allocation of scarce airport take-off and landing slots discussed in Section III involves just the node at each end of a journey, the problem of allocating scarce rail network capacity can apply at every location along a route, with the many complexities noted above. To use a pricing mechanism
