Railway In UK Essay

Submitted By amrmuru
Words: 1799
Pages: 8
Open Document
Amr Osman
John Cruickshank
Economics
5 March y
Railway Industry in the UK

Table of Contents
Topic
Page
Abstract
1
Introduction
2
Methodology
2
Market Structure and Concentration
2
Economies of Scale and Natural Monopoly
3
Public Interest
4
Barriers of Entry
5
Competition
5
Profits
6
Conclusion
6
References
7

Abstract
This essay will attempt to consider to what extent the UK railway industry is a natural monopoly by applying the basic theory of natural monopoly on this case study. It will discuss the concentration ratio of the industry, economy of scale, competition in the industry, public interest, profits, barriers to entry and possible alternatives to the current market structure.

Introduction
The railway industry is one of the largest and one of the fastest growing markets in the UK. Britain's railways are vital to the country's economy. More people and more goods than ever move by train today – train journeys increased by more than 50% between 2003 and 2013 and the railways carry 17% more cargo than in 2001. Over 1.5 billion travellers used trains In 2012 – an increase of 8% which is almost 24,000 trains in a day. (Orr.gov.uk, 2014)

Methodology
Throughout the essay the main source for information is the worldwide internet including websites such as the department of transport, ATOC and ONS. The information off the internet is used to be able to apply the concept of natural monopoly to the railway industry using statistics and general facts about the market structure. A variety of economic books was used for accurate definitions of economic terms and explanations of economic theory relating to barriers of entry, market structure, economies of scale and natural monopoly.

Market Structure and Concentration ratio
The different types of market structure can be summarised in the table below:
Type of market structure
Number of Businesses
Freedom of entry
Nature of Product
Price Controls perfect competition
Very Many
Open, unrestricted
Various
Elastic, driven by buyer monopoly One
Closed, unrestricted
Unique
Inelastic, firm control
Monopolistic competition
Many
Open, unrestricted
Same
Relatively elastic
Oligopoly
Few
Limited, restricted
Similar
Relatively inelastic

The UK railway industry can be considered to be a monopoly as network rail (public company) provides the infrastructure needed for the railway services. However there are many providers for the railway service, which gives rise to market concentration as there is more than one supplier in the market. In 2003, the top five businesses produced 40% of the market output and the top fifteen businesses provided 81% of the total output (Mahajan, 2005). In contrast, in 2004, the top five businesses produced 41% of the market output and the top fifteen businesses produced 88% of the output (Mahajan, 2006). As the timespan for the information is limited, the conclusions that can be made are restricted. However we can see that the top five businesses almost stayed the same whereas the output of the top fifteen businesses increased by 7% in one year. This suggests that the top five businesses are dominating the market and the top fifteen are increasing productivity. As you can see from the pie chart above, the market is dominated by eight main firms. First group has the highest market concentration at 25.1% of train kilometres operated in 2009/10.

Economies of Scale and Natural Monopoly
Minimum efficient scale (MES) is the lowest level of output where each of the economies of sale are utilised. A firm’s MES is the point where no more economies of scales can be attained, it is the point where the firm can function efficiently and competitively in a market. If MES is attained when output is significantly elevated relative to the complete market, it is probable that a small amount of companies will have the ability to be competitive in the market. This is what happens in a natural monopoly.
This graph shows the long run average cost where point A is the minimum
Show More

Related Documents: Railway In UK Essay

UK transport type Essay

are several towns in the UK that have a train station there are still few who don’t. This makes traveling by train a little difficult to reach some destinations as it will require further transportation by car or taxi. Purchasing tickets from the British Rails in advance will help save money which will make traveling by train more affordable compared to traveling by bus or car. Ferries Traveling by sea is used by ferry or cruise ship. For short sea crossings to the UK or between the mainland…

Words 655 - Pages 3

Uk Report Essay

UK REPORT COMPARATIVE ANALYSIS OF PUBLIC TRANSPORT SECTORS IN UNITED KINGDOM AND INDIA BY DEEKSHA BHATIA MBA 3 CONTINENT Class of 2012 In Partial Fulfillment of Award of Master of Business Administration AMITY INTERNATIONAL BUSINESS SCHOOL AMITY UNIVERSITY DECLARATION I, Deeksha Bhatia student of Masters of Business Administration…

Words 4458 - Pages 18

Past Exam Questions: 3victorian And Edwardian Era

Stephen Broadberry has attributed long-term differences in labour productivity between the UK, USA and Germany over the period 1870-1914 to…

Words 4484 - Pages 18

Public Law Essay

give effect to its terms’. The second principle is that parliament is the supreme law-making body, thus can make and unmake any law whatsoever. This is demonstrated in the case of Edinburgh & Dalkeith Railway v Wauchope where Mr Wauchope claimed that the private Act obtained by the Railway Company should not be applied as it had been passed without his having notice of the passing of the Act as required by Standing Orders. Lord Campbell quoted that: All that a court…can do is to look…

Words 1259 - Pages 6

Essay about Discuss the relative importance of physical and human factors in accounting for changes to vegetation over time within ecosystems in the British Isles

including the building of homes, factories and railways. The introduction of these has meant that land has had to be cleared for construction and so many animals and plants lost their habitats. Plants, therefore, grow in urban environments, such as on window ledges, cracks in the pavements or roofs of houses. With the introduction of railways and roads, plants have been able to spread their seeds further and grow on the sides of roads and railways, quite often where they are not disturbed by humans…

Words 958 - Pages 4

North West Mounted Police (NWMP)

London” (Brown, 1973, p.8). Political ambitions of that period were inextricably intertwined with commercial and industrial gains which required expanded westward markets for raw materials as much as for final products. The idea of transcontinental railway could assure the transportation of production to St. Lawrence River, hence facilitate and accelerate the trade. Moreover the expansion to the West also promised profitable investments in timber production, mine development and land. The political…

Words 746 - Pages 3

Essay about Unit Introduction

very interested by most of the UK. This interest has been broadcasted by media and in a lot of particular travel and tourism television shows. There has been a rapid growth across all the travel and tourism. Travel and tourism is the one of the largest sectors to work in. Here are the statistics of tourism in different countries: Definitions: -Outbound; Out of the UK, travelling from UK to destination e.g. Spain or France -Inbound; In to the UK, travelling to the UK from a destination e.g. Spain…

Words 2415 - Pages 10

History Of Convicts

ECON 1141 Tutorials Tutorial 1 Yagan Social History: Race relations Activity between the aboriginals and settlers Seen as an outlaw but also noble Patriotism (the British understand it) Economic History: Scarcity of resources (food) Father was executed Property rights (livestock being taken, land for aboriginals) Wasn’t best outcome for both parties (pareto optimality) Kable Social History: First fleet to NSW Governor Arthur Philip appointed him as an overseer Brought a sense of trust…

Words 2596 - Pages 11

Ladbroke Grove Essay

have been prevented by an operational Automatic Train Protection (ATP) system, but wider fitting of this had been rejected on cost grounds. This severely damaged public confidence in the management and regulation of safety of Britain's privatized railway system. This crash is also known as the Paddington train crash. *A public inquiry into the crash by Lord Cullen was held in 2000. Since both the Paddington and Southall crashes had reopened public debate on ATP a separate joint inquiry considering…

Words 1104 - Pages 5

The History Of The United Kingdom

London has long been a great world port and trading center. The port of London consists of two huge docks and 43 miles of wharves along the Thames River. London also has a remarkable transportation system. Expressways, and underground and surface railways carry more than one million commuters between the outlying areas and central London each workday. More than 350,000 commuters travel by subway, about 400,000 take surface trains and more than 100,000 go by bus. About 100,000 people drive their cars…

Words 4222 - Pages 17