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Applying social marginal cost pricing in rail PPPs: Present state, drawbacks and ways forward

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  • Bernardino, João
  • Hrebícek, Zdenek
  • Marques, Carlos
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    Abstract

    The application of social marginal cost pricing (SMCP) in PPP's in the railway sector faces several challenges. We examine in detail the practical applicability of SMCP in railway PPPs from the perspectives of cost accounting and effectiveness of SMCP towards the allocative efficiency goal, addressing the likely drawbacks in conciliating the welfare objectives of SMCP with the objectives of project financing (cost recovery) and value for money that justify the realization of PPP's. To this end, we combine theoretical analysis with the observation of empirical results of a case study. We split the analysis per type of private service provision, which can be for service operation or infrastructure management. For infrastructure management, we recommend splitting the operator remuneration and the track access charges. For service operation, we argue that the correct decision on source of funding of the service operator should depend on the characteristics of the contract.

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    Bibliographic Info

    Article provided by Elsevier in its journal Research in Transportation Economics.

    Volume (Year): 30 (2010)
    Issue (Month): 1 ()
    Pages: 59-73

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    Handle: RePEc:eee:retrec:v:30:y:2010:i:1:p:59-73

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    Keywords: Social marginal cost pricing Public-private partnerships Railways;

    References

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    1. Rothengatter, Werner, 2003. "How good is first best? Marginal cost and other pricing principles for user charging in transport," Transport Policy, Elsevier, vol. 10(2), pages 121-130, April.
    2. Pollitt, M. & Smith, A.S.J., 2001. "The Restructuring and Privatisation of British Rail: Was it really that bad?," Cambridge Working Papers in Economics 0118, Faculty of Economics, University of Cambridge.
    3. Vickerman, Roger, 2004. "Maintenance incentives under different infrastructure regimes," Utilities Policy, Elsevier, vol. 12(4), pages 315-322, December.
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