Assessing the Marginal Infrastructure Maintenance Wear and tear Costs for Britain's Railway Network

This paper applies econometric methods to estimate marginal track maintenance cost in Britain — for the first time. The British case is the most radical example of rail reform in the world, and the 2005 Railway Act has resulted in a new and unique regulatory process for determining funding and service levels, where the marginal cost of changing service patterns will be a key input. Cost elasticity and marginal cost estimates are reported and compared against the results of the engineering-based approaches currently used to set variable access charges in Britain, and also against those reported for other countries. The relationship between traffic density and elasticity and marginal cost estimates is explored. The paper also discusses the potential biases introduced into elasticity and marginal cost estimates when dealing with a railway that may be out of steady state, and how to adjust for these.