Dynamic pricing of track capacity in the short-term allocation process

Abstract

Short-term track allocation is conventionally made on a first-come-first-served basis, but when capacity is scarce, more welfare efficient procedures are needed. Market prices for capacity is looking increasingly interesting as more train traffic is conducted on commercial terms. This is especially true for freight train operation, which dominates short-term allocation processes. In this paper we propose a dynamic pricing mechanism for the short-term allocation process. We use simulation to test the mechanism for stability, reliability, safeguard against manipulation and the welfare of the outcome.