Assume that there are two train types competing for capacity:
regional trains and long-distance trains. The two demand functions for the train types are completely separable; we can imagine that the two trains serve separate markets, and only happen to
share this particular stretch of track. Regional trains are operated
by a public operator that strives to maximize consumer surplus
(the regional government covers operating deficits ), while long-
distance trains are run by a commercial operator trying to
maximize profits. The institutional setting is such that the regional
train operator first decides the number of trains it will run, and
then the long-distance train operator decides the number of trains
it will run, given the intentions of the regional train operator. The
government funds infrastructure investments, but does not take
into account that the timetables assumed for the do-nothing and
the investment scenarios affect the outcome of the appraisal. The
operators, however, are fully aware of the importance of the
timetables used in the appraisal scenarios.