I'm not sure if any of these terms have been used or not, but I'll throw them out there and see how well the reality fits the economic theory (if the market is like any of the other markets in the world, then not bloody much!)
A market is quite simply a place where buyers and sellers meet to buy and sell things.
Depending on how you segment an economy, which is made up of sectors then industries then markets (sort of...) the market here is between individuals and firms. Firms are producers. It is their job to produce output by combining the inputs of land, labour and capital then sell it and hope to make a profit. In this case people are consumers. It is their job to maximise their own welfare by exchanging things they have (in this case money) for things they want more than what they have.
Elementary, you might say, but get this. What's the output? Is it transport? Or.. is it train travel? For me, if I'm going on a day out on a train, it's the latter. I'm not going to go for a day out on a bus. But for someone who wants to get from London to Birmingham, its much more likely the former. Train travel is a usually a derived demand (people demand being somewhere they currently are not, but to get it they demand trains). But enthusiasts and some day-trippers might demand the travel directly. This is a more important distinction than it seems at first, because analysis of the
Transport market is arguably very different from the
Rail Travel market. What people want is to be somewhere other than where they are, but to do that, some of them need trains and some don't. People commuting from St Albans to London might well be demanding the train travel itself - or at least, behaving as if they are. This could be because they do not own a car or there are no roads where they want to go, or because they love nothing more than making a five-weekly return trip, on those trains - and then all the things in between. Most people would want to consider the price, convenience, speed, conditions ect. before buying. Add to that the distinction between short and long run. In one day, somebody might have no choice but to take the train, but in a year they could arrange an alternative.
I'm coming to costs soon
Also, how much is being supplied? How much capacity to supply is there? These questions might seem like they have answers, but what constitutes supply for one person does not for everyone. The problem with producing services as opposed to goods is that not only do they tend to be non-homogeneous (not all the same), but their quality is much more subjective in terms of the welfare it brings consumers. True; it varies with all things, but the amount of utility (what you get back from what you paid for something) I get from a pint of milk doesn't change much from what everyone else who buys milk gets back from it. But a train journey does. It's hard to argue that movement is non-homogenous, because will people pay to be in a different place, but how long it takes what the train is like (you all know the rest...) affects it too.
So my point is, we have some very imprecise ideas about who uses the network when, where and why they do so rather than taking any other form of transport. Much less so, at least I think, than, say, Tesco knows about its customers (who they are, where they live, what they buy and when and why they shop there and not elsewhere). Price Elasticity of Demand is the responsiveness of consumer demand for a good or service in response to a change in price. (Bread is low, cars are high - its based on how much something is essential.) This is arguably THE MOST IMPORTANT thing firms need to know when setting price. The rail industry does not know this. We're into the contentious bit now, but I think that an industry which suffers as much from people simply stealing its output as this one does knows so little about how many customers it has, when they travel, where they are actually going and what they would be willing to pay for it that the business of trying to cut costs becomes futile.
Now lets look at the other side. A railway network is a "natural monopoly". The economies of scale in the industry are sooooooo big, that even when only one firm operates in the market (said "monopolist" - sole provider of trains services) they do not reach the "Minimum Efficient Scale" (the lowest level of output at which Average Cost is equal to Marginal Cost. And there is the heart of it. Average cost is the total cost per unit of output. Marginal cost is the extra cost of producing one more unit of output. Where the two meet, production is taking place at the lowest possible cost per unit (productive efficiency has been achieved).
If this does not seem obvious (I agree that it is obscure!) then think of the alternative. It is rubbish to talk about introducing competition into markets with such high costs! Should an extra railway line be built between Manchester Pic and Manchester Airport to create competition between two separate companies? I mean theoretically, this is efficient because if one company is better than the other and it has lower costs, it charges less and people go there instead. As a result the other company goes bust.... AFTER they've spent millions of pounds and demolished thousands of homes DUPLICATING A ROUTE! Indeed for true competition to apply, hundreds of alternative sellers may need to be in some markets, given the number of buyers.
Back to the numbers, I think that we should call trains natural monopolies because, if we look at the most common economies of scale, we can see them.
Marketing economies
Purchasing economies
Technical economies
Managerial economies
and so on...
I think they could all apply. Feel free to argue with me.
Last thing, my argument is, I guess, that a single firm should own, maintain, and operate everything that is railway related. That is how you drive down costs - and you expand further on what we've got. The more data we can collect, the more we can exploit these and the more synergies there will be.
But the infrastructure is a currently public asset, of crazily high value. No one private company can/would buy that.
I know... lets keep that public and rent it out to firms who produce geographically determined output.
Look how successful that was.
for example. Working practices are very outdated, and quite frankly, sometimes out of touch with reality. Staff are monoskilled, trained by TOCs not to help others and increasinly incapable of understanding the systems with which they work on a daily basis.
