We provide a model of local railway passengers service able to account for the main specific characteristics of the sector under vertical separation. Afterwards, we use this model to carry out both a normative analysis of the operators’ investment decisions and an assessment of the welfare...

This paper examines the effects of a competitive fringe on a regulated firm. Using Hart's (1983) model, we show that competition weakens the managerial incentives for cost reduction: when there is correlation between the cost levels of the firms in the industry, costs are higher in the regulated...