We aim at testing whether the breakdown of the Italian monopoly in rail services would either
decrease or increase the allocative efficiency of the industry. Specifically, this aims at verifying if
the market of rail services in Italy is such that a single firm can produce all relevant output vectors
either more or less cheaply than two or more firms. It is well known that, when all firms in an
industry have access to a common technology, properties of the firm cost functions reveal the
most efficient industry structure (Bailey and Friedlaender, 1982).
Within the considered two-product industry, in the case when all of n firms (either actual or
potential competitors) have access to the same technology, the cost function CðY ; QÞ is subad-
ditive at Z ¼ ðY ; QÞ if and only if for non-negative Y ; Q the following conditions hold: