ECONOMIC-STABILITY IN NETWORK INDUSTRIES

Much of the recent attention in Europe regarding the use of transport as an instrument of integration has centered upon the creation of an a ppropriate infrastructure as illustrated by the TENs Programmes of the European Union. There are also issues concerning the way operations a nd use of transport networks can contribute to greater spatial economi c integration. The focus of recent policies has been the liberalizatio n of transport markets and the greater involvement of the private sect or in providing actual transport services. There are theoretical groun ds for suggesting this can enhance both the technical and dynamic effi ciency of supply and these tend to be supported by the emerging empiri cal findings. However, there are difficulties with relying on market a nd competitive forces to provide network services. The nature of suppl y and demand characteristics associated with networks may not produce a stable market solution. At the extreme this can result in deficienci es in output and, under less theoretically rigid conditions, can lead to volatility in supply. The result is that even where transport may h ave the potential to enhance spatial cohesion this potential will not be completely realized. This paper, drawing in particular on the theor ies of Edgeworth, looks at the underlying nature of this potential pro blem, examines the empirical evidence and considers appropriate policy responses. (C) 1998 Elsevier Science Ltd. All rights reserved.