The purpose of this paper is to answer the question of whether train delays are a price-relevant marginal cost. The question has been raised by the Swedish infrastructure manager (Trafikverket) which is responsible for setting track access charges. The charging of track access fees is regulated in the Railway Act and consists mainly of marginal cost pricing and fees for cost recovery above marginal cost.

The main reason for charging track fees according to the marginal cost principle is to give economic incentive in order to influence the market agents to take these externalities into account in their decision-making. When an externality is correctly priced this externality is no longer "external" on behalf of the market agents and, in this way, economic efficiency is achieved through a decentralized decision-making.

In order for a certain cost to be price-relevant, with respect to the marginal cost pricing principle, it is required that there are some externalities involved and also that there is a relationship between cost and traffic volume.

Rail services are conducted according to a detailed timetable where each train is regulated geographically with minute precision. Delays primarily occur through an incident, such as infrastructure failure or breakdown of vehicles, leading one or more trains to deviate from the time table. Subsequently this initial delay is spread in the system through the interaction between trains that is built into the timetable.

In the short run the capacity of the infrastructure is fixed. Train delays can therefore be influenced by the number of faults occurred and by the construction of the timetable (which is crucial for the spread of the initial disturbances to other trains).

Recently a new track fee, called "quality fee", has been introduced which is aimed at influencing the number of faults occurring, both on behalf of train operating companies and the infrastructure manager. The fee is initially set at a rather low level and may be raised in the future if it will be considered necessary.