Papers & reports

The Fehmarn Belt Duopoly – Can the Ferry Compete with a Tunnel?

Rafael AignerKatharina Weber, Transportation Research Part A: Policy and Practice, 100, 1-15, May 2017

The Fehmarn Belt is a strait between Denmark and Germany, currently served by a ferry operator. We analyse competition between the ferry service and a planned tunnel, the Fehmarn Belt Fixed Link. We develop a differentiated duopoly model to address two questions: 1. Will the tunnel induce the ferry to exit the market once it operates? 2. Will the tunnel’s toll revenue suffice to cover its cost? Using real-world data and traffic forecasts, we show that it should not be taken for granted that the ferry will exit the market, and that if the ferry competes, the tunnel project will make a loss.

Keywords: competition, regulated industries and market design, state aid