Timetable assumptions in railway investment appraisal

Jonas Eliasson and Maria BörjessonDirector 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

A B

Benefits of capacity improvement

No investment InvestmentTrains/hour 6 6Travel time 46 40Passengers 1015 1104

Consumer surplus 7 400 Producer surplus 16 300 Total social benefits 23 700

Benefits of capacity improvement – version B

No investment InvestmentTrains/hour 6 6Travel time 46 40Passengers 1015 1104

Consumer surplus 7 400 Producer surplus 16 300 Total social benefits 23 700

No investment InvestmentTrains/hour 3 6Travel time 40 40Passengers 1000 1104

Consumer surplus 8 800 Producer surplus 2 700 Total social benefits 11 500

Version A Version B

• 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…

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 frameworkSimplified version of Swedish guidelines

[

Benefits compared to 3 trains/hour, before investment

-25000

-20000

-15000

-10000

-5000

0

5000

0 1 2 3 4 5 6 7 8

Benefits

trains/hour

CS sc0 PS sc0 CS+PS sc0

The investment shifts the benefits curves

-25000

-20000

-15000

-10000

-5000

0

5000

0 1 2 3 4 5 6 7 8

Benefits

trains/hour

CS sc0 PS sc0 CS+PS sc0

-25000

-20000

-15000

-10000

-5000

0

5000

10000

15000

0 1 2 3 4 5 6 7 8

Benefits

trains/hour

CS sc1 PS sc1 CS+PS sc1

The appraisal outcome is determined by timetable assumptions

-25 000

-20 000

-15 000

-10 000

-5 000

0

5 000

10 000

15 000

0 1 2 3 4 5 6 7 8

Benefits

trains/hour

CS+PS sc0 CS+PS sc1

appraisal B appraisal A

• 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 current 3R,3L 6R,3L 28Reg. op.:s stated intention, compared to current

3R,3L 4R,4L 38

Long-dist.op.’s suggestion, compared to current

3R,3L 3R,5L 44

Outcome after investment, compared to current

3R,3L 6R,4L 27

• 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 doesn’t ”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

Decision maker

Fund MY railroad!