ABSTRACT
This chapter examines the extent to which competition had materialised in the passenger rail market by early 1998. It seeks to identify the opportunities for on-rail competition which existed at that time, to assess whether these were being exploited and to discuss their impact upon the relationship between the passenger rail industry and the state. The chapter reviews debates surrounding the appropriateness of on-rail competition and begins by demonstrating that many potential opportunities for competition between passenger operators exist within the new industry structure. Competitive new entry rests upon the theory of contestable markets. The theory maintains that incumbents will be incentivised to produce efficiently because of the threat of new market entry from potential competitors. The theory maintains that incumbents will be incentivised to produce efficiently because of the threat of new market entry from potential competitors. Competition along duplicated routes can also occur without competitive new entry.
