Analysis of the competition of the South-Eastern Railway of Peru through a timetable auction

Our research analyzes the design of an auction model for railway transportation on the South-East Railway of Peru, managed by Ferrocarril Transandino S.A. (Fetransa) and operated by PeruRail. Initially, the regulatory framework aimed to promote competition in railway transportation through timetable auctions and infrastructure access. However, the concession has resulted in a vertically integrated structure that favors PeruRail, which faces minimal direct competition, controls high-demand time slots, and hinders the entry of other operators due to strategic and structural access barriers. To address these distortions, we propose reforming the auction mechanism to neutralize these advantages and enhance competition. In this revised framework, the track usage fee will serve as the competitive factor, with the highest bid above a minimum base rate securing the allocation. Additionally, we propose the implementation of asymmetric tariffs to compensate for the higher costs faced by operators with fewer economies of scale, technological optimizations to facilitate equitable access to time slots, and stricter oversight mechanisms to ensure transparency in timetable allocation. These measures aim to balance the market and safeguard competition through a more equitable and efficient auction design.