Timetable assumptions in railway investment appraisal

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

2. Sample appraisal of a railway investment A B • 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

3. Benefits of capacity improvement

4. Benefitsofcapacityimprovement – version B Version A Version B

5. What happened? • What happened? • There’s nothing fishy with the example – based on official guidelines! • What should be done? • Possilibity for an analyst to be strategic here…

6. [ A stripped-down CBA frameworkSimplified version of Swedish guidelines • 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

7. Benefits compared to 3 trains/hour, before investment

8. The investment shifts the benefits curves

9. The appraisal outcome is determined by timetable assumptions

10. Lessons so far • 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!

11. Strategic opportunities • An analyst or stakeholderwith a conscious or unconsciousagenda has LOTS ofopportunitiesto be strategic • The world is filledwith optimism bias, strategicmisrepresentation, agendas etc. • CBAs areusuallymade by agencies, regions, even operators… • … and usedto lobby for national funds • Virtuallyimpossible for third party to check influenceoftimetables!

12. Severaltraintypescompeting for capacity • Regional trainsslower (takes 45 minutes) • Long-distancetrains faster (takes 25 minutes) • Regional operator first maximizes its CS, then long-distance operator maximizes its profits conditional on remaining capacity

13. Current Swedish practice: current vs. planned(typical for most countries) • Collect operators plans/wishes for the future • Check whatinvestmentsareneededtoaccommodateexpandedtraffic • Adjustto get a ”reasonablepackage” • This forms ”do-something” scenario • Do-nothing scenario: often same numberoftrains, runningslower • Hence: timetable and investmentsprobably optimal given oneanother; do-nothing scenario likely not verygood • Thisexaggeratesbenefits

14. Trust the map or reality? • The CBA is a representation ofreality • Evenif the currenttimetable is ”really” optimal, it may be suboptimal in the CBA • Common tocomparecurrenttimetableto (more or less) ”CBA-optimal” timetable in the investment case • Exaggeratesbenefits! • Needtowork in the ”CBA world” bothwith and without investment • If thisdoesn’t ”work” – improve CBA framework

15. What principle should be used? • ”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 (?)

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

17. Conclusions • 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…

18. Is this trivial? Fund MYrailroad! • Yes, in a way… • That timetables matter is trivial… • …but why do we have 400+ pages of CBA guidelines not mentioning timetable principles? Decision maker Withoutexplicit, verifiable, comparabletimetableprinciples, railway CBAs maybecomeinstruments for lobbyist wolves dressed in the sheepish clothes of transport economists CBA Decision maker