Timetable assumptions in railway investment appraisal Jonas Eliasson and Maria Börjesson Director Centre for Transport Studies Professor Transport Systems Analysis

Currently 3 trains/hour Wants to increase to 6 trains/hour Investment in capacity needed to keep travel time constant Increase number of meeting points Demand elasticity, capacity relationship, values of travel time and waiting time, producer costs from Swedish appraisal guidelines Sample appraisal of a railway investment AB

Benefits of capacity improvement

Benefits of capacity improvement – version B Version A Version B

What happened? Theres nothing fishy with the example – based on official guidelines! What should be done? Possilibity for an analyst to be strategic here… What happened?

Number of trains n(only one train type) c = b + t(n) + /2n(fare + travel time + waiting time) Elastic demand (-0.7) Producer costs increase linearly with total passenger time, train time, train distance Capacity relation t = t(n) static volume-delay-function could use dynamic vdf, but messier A stripped-down CBA framework Simplified version of Swedish guidelines [

Benefits compared to 3 trains/hour, before investment

The investment shifts the benefits curves

The appraisal outcome is determined by timetable assumptions

Without an explicit (and verifiable) principle for choice of timetable, the benefit of an investment is not defined; result is virtually arbitrary Socially optimal? Profit-maximizing? Current vs. planned? Current vs. optimal? Unawareness of this often results in strange results! Appraisal guidelines determine values of time, future fuel prices, economic growth, demand elasticities … to ensure comparability across investments BUT timetables are in practice up to analysts judgment! Lessons so far

An analyst or stakeholder with a conscious or unconscious agenda has LOTS of opportunities to be strategic The world is filled with optimism bias, strategic misrepresentation, agendas etc. CBAs are usually made by agencies, regions, even operators… … and used to lobby for national funds Virtually impossible for third party to check influence of timetables! Strategic opportunities

Regional trains slower (takes 45 minutes) Long-distance trains faster (takes 25 minutes) Regional operator first maximizes its CS, then long-distance operator maximizes its profits conditional on remaining capacity Several train types competing for capacity Without investment With investment Total benefit Reg. op.:s plan, compared to current3R,3L6R,3L28 Reg. op.:s stated intention, compared to current 3R,3L4R,4L38 Long-dist.op.s suggestion, compared to current 3R,3L3R,5L44 Outcome after investment, compared to current 3R,3L6R,4L27

Collect operators plans/wishes for the future Check what investments are needed to accommodate expanded traffic Adjust to get a reasonable package This forms do-something scenario Do-nothing scenario: often same number of trains, running slower Hence: timetable and investments probably optimal given one another; do-nothing scenario likely not very good This exaggerates benefits Current Swedish practice: current vs. planned (typical for most countries)

The CBA is a representation of reality Even if the current timetable is really optimal, it may be suboptimal in the CBA Common to compare current timetable to (more or less) CBA- optimal timetable in the investment case Exaggerates benefits! Need to work in the CBA world both with and without investment If this doesnt work – improve CBA framework Trust the map or reality?

Current vs. planned timetable Immense possiblities for strategic misrepresentation by operators, regions, agencies… Need explicit principle Testable/verifiable by third party! Many countries (Sweden etc.) regulate rail use heavily Subsidies, public provision of transit, capacity allocation, cross-subsidising track charges… Socially optimal timetable reasonable approximation (?) Other countries: monopolistic operators on separate markets Profit-maximizing timetable reasonable approximation (?) What principle should be used?

Welfare economics The appraisal world is virtually disjoint from the world of railway operations & planning Transport modeling Cost-benefit analysis Transport policy Railway operations & planning Operations research Adler. Pels & Nash (2010)

Without an explicit principle for timetable choice, permanent across appraisals, CBA is pointless: investment benefits are not well- defined Room for strategic behaviour by stakeholders Current practice likely exaggerates benefits Socially optimal timetables before/after often reasonable Sometimes profit-maximization? Need to accept that this means CBA-optimal Establish collaboration railway operations transport economics Related question: CBA for timetables… Conclusions

Yes, in a way… That timetables matter is trivial… …but why do we have 400+ pages of CBA guidelines not mentioning timetable principles? Is this trivial? Without explicit, verifiable, comparable timetable principles, railway CBAs may become instruments for lobbyist wolves dressed in the sheepish clothes of transport economists CBA Decision maker Fund MY railroad!