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Incentive Regulatory policies: The Case of Public Transit Systems in France

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Author Info

  • Philippe Gagnepain

    ()
    (Departamento de Economía - Universidad Carlos III de Madrid)

  • Marc Ivaldi

    ()
    (TSE - Toulouse School of Economics - Toulouse School of Economics)

Abstract

This paper is aimed at assessing the empirical relevance of the new theory of regulation. It relies on a principal-agent framework for studying the regulatory schemes used in the French urban transport industry. Taking the current regulatory schemes as given, the model of supply and demand provides estimates for the firms' inefficiency, the effort of managers, and the cost of public funds. It allows deriving the first-best and second-best regulatory policies for each network and comparing them with the actual situation in terms of welfare loss or gain. Fixed-price policies are lying between fully informed and uninformed second best schemes. Cost-plus contracts are dominated by any type of second-best contract. From these results, we may conjecture that fixed prices contracts call for better informed regulators.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number hal-00622846.

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Date of creation: 2002
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Publication status: Published, RAND Journal of Economics, 2002, 33, 605-629
Handle: RePEc:hal:journl:hal-00622846

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  1. B. Caillaud & R. Guesnerie & P. Rey & J. Tirole, 1988. "Government Intervention in Production and Incentives Theory: A Review of Recent Contributions," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 1-26, Spring.
  2. Gasmi, F & Laffont, Jean-Jacques & Sharkey, W W, 1997. "Incentive Regulation and the Cost Structure of the Local Telephone Exchange Network," Journal of Regulatory Economics, Springer, vol. 12(1), pages 5-25, July.
  3. Philippe Gagnepain & Marc Ivaldi, 2002. "Stochastic Frontiers and Asymmetric Information Models," Journal of Productivity Analysis, Springer, vol. 18(2), pages 145-159, September.
  4. Cornwell, C. & Schmidt, P., 1993. "Production Frontiers and Efficiency Measurement," Papers 427e, Georgia - College of Business Administration, Department of Economics.
  5. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  6. Dag Morten Dalen & Andres Gomez Lobo, 1996. "Regulation and incentive contracts: An empirical investigation of the Norwegian bus transport industry," IFS Working Papers W96/08, Institute for Fiscal Studies.
  7. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200.
  8. Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
  9. Harry F. Campbell, 1975. "Deadweight Loss and Commodity Taxation in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 8(3), pages 441-47, August.
  10. Magnus, J.R., 1982. "Multivariate error components analysis of linear and nonlinear regression models by maximum likelihood," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153211, Tilburg University.
  11. Magnus, Jan R., 1982. "Multivariate error components analysis of linear and nonlinear regression models by maximum likelihood," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 239-285, August.
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