Renato Redondi

The effect of open access competition on average rail prices. The case of Milan – Ancona

Abstract Italy is among the few countries where open-access rail competition exists, and the entry of the newcomer NTV during 2012 radically changed the market conditions. The aim of this paper is to shed some light on the effect of competition on price strategies. To do that, we focused on the period before and after the opening of a new HS direct service between Milano and Ancona. Through a web crawler, we collected available fares, from 30 to 1 days in advance of departure and for 15 months, between September 2013 and December 2014. We statistically analysed the sample i) to estimate the price reactions of the incumbent after the new entry, and ii) to compare the price strategies of the two operators. Results show that the incumbent reduced economy class prices by about 15%. The newcomer is slightly cheaper for bookings well in advance of the departure date, but raises prices in the very last days before departure. Their fare strategy also changed after three months of operations, when they applied lower prices. Finally, we see that Trenitalia does not respond to NTVs prices, whereas the opposite is true, demonstrating that the newcomer is the price-taker in the short-run.

EasyJet pricing strategy: determinants and developments

We analysed the pricing policy of easyJet, the second largest low-cost carrier in Europe, using fare data for all easyJet flights from 2007 to 2012. For each flight, we determined the average fare per kilometre and advance booking discounts (ABDs) within a 90-day period before departure. By applying a panel methodology, we show that average fares tended to be lower, with larger discounts for advance booking, when easyJet dominated departure or arrival airports. Direct and indirect competition significantly reduced average fares and increased discounts for advance booking. Fares increased and ABDs decreased with easyJets experience with specific routes. Other things being equal, the analysis also showed that easyJet reduced the average discount for advance booking during the period.

Service Quality in Electricity Supply: The Customer's Costs

This paper describes the methodology employed and the results obtained in a study we conducted to estimate the costs sustained by electricity users for voltage quality. The study concerned, in particular, Italian industrial consumers, connected to medium voltage distribution networks. We have found that the direct costs for voltage disturbances are highly concentrated, and are quite large in some observed sensitive sectors. Indirect costs are almost as significant as the direct costs, and are more distributed across the national economy (they concern a larger number of sectors). While the average Italian firm is unlikely to suffer important costs because of voltage disturbances, direct and indirect costs have an overall impact on the national economy that cannot be overlooked. The magnitude of voltage quality costs seems to justify a regulatory intervention. The uneven distribution of these costs, however, seems to indicate that an “individual” policy action (i.e. limited to sensitive sectors) might be a more sensible decision than a general intervention. We propose three, not mutually exclusive, lines of action. 1) Identification of costs for industrial users. It seems reasonable that any type of intervention should be preceded by an objective assessment of costs for voltage quality. To this end, a larger diffusion of power quality analyzers seems necessary. Similarly, a dissemination of a unified methodology for cost assessment seems extremely useful. The methodology described here is certainly a good example. 2) Ex-ante measures: contracts for quality. Contracts for quality, as already envisaged by the current Italian regulation, seem in this context a valuable option. These contracts oblige distribution operators to compensate consumers for quality levels that have been defined by the two parties. Nonetheless, several aspects need to be explored in the practical use of these contracts. 3) Ex-post measures: reconciliation of disputes. It seems possible to pro-mote initiatives for the reconciliation of controversies between distributors and industrial users. Also in this case, several practical issues would need further investigation.

Cost Functions and Determinants of Unit Cost Effects in Horizontal Airline M&As

This paper analyses the unit cost effects of mergers and acquisitions (M&As) using linear, quadratic, and translog cost functions. In addition to a basic unit cost model we specify separate models for distress, profit, relative size, and cost difference, among the merging firms. We use a sample of 19 horizontal M&As in the international airline industry and data spanning from 1980-2012. Our models show that M&As do not affect unit costs in a significant way, unless the relative size difference of the merging firms is large, in which case we detect an increase in unit costs.