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Contract Renewal as an Incentive Device: An Application to the French Urban Public Transport Sector

Author

Listed:
  • Axel Gautier
  • Anne Yvrande-Billon

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

In the French urban public transport industry, operations are often delegated and periodically put out for tender. Thus, operators' incentives to reduce costs come from both profit maximization during the current contract and from the perspective of contract renewal. We construct a dynamic incentive regulation model that captures these features and we show that both the level of cost-reducing effort and its repartition during the contracting period depend on the contract type (cost-plus, gross cost, or net cost contract). We then estimate a cost frontier model for an eight-year panel of French bus companies (664 company-year observations) to test our predictions.

Suggested Citation

  • Axel Gautier & Anne Yvrande-Billon, 2013. "Contract Renewal as an Incentive Device: An Application to the French Urban Public Transport Sector," Post-Print hal-01052683, HAL.
    • Handle: RePEc:hal:journl:hal-01052683
    DOI: 10.5202/rei.v4i1.88
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    Cited by:

    1. Andrea Boitani & Marcella Nicolini & Carlo Scarpa, 2013. "Do competition and ownership matter? Evidence from local public transport in Europe," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1419-1434, April.
    2. Freddy Huet & Simon Porcher, 2013. "Innovation and regulatory outcomes: evidence from the public-private contracts for water supply in France," Chapters, in: Mehmet Ugur (ed.), Governance, Regulation and Innovation, chapter 9, pages 216-236, Edward Elgar Publishing.
    3. Avenali, Alessandro & Boitani, Andrea & Catalano, Giuseppe & D’Alfonso, Tiziana & Matteucci, Giorgio, 2016. "Assessing standard costs in local public bus transport: Evidence from Italy," Transport Policy, Elsevier, vol. 52(C), pages 164-174.
    4. Marian MOSZORO, 2014. "Efficient Public-Private Capital Structures," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(1), pages 103-126, March.
    5. An, Yonghong & Hong, Shengjie & Zhang, Daiqiang, 2023. "A structural analysis of simple contracts," Journal of Econometrics, Elsevier, vol. 236(2).
    6. Joanna Piechucka, 2021. "Cost efficiency and endogenous regulatory choices: evidence from the transport industry in France," Journal of Regulatory Economics, Springer, vol. 59(1), pages 25-46, February.
    7. Joanna Piechucka, 2020. "Cost Efficiency and Endogenous Regulatory Choices: Evidence from the Transport Industry in France," Discussion Papers of DIW Berlin 1851, DIW Berlin, German Institute for Economic Research.
    8. Mouwen, Arnoud & van Ommeren, Jos, 2016. "The effect of contract renewal and competitive tendering on public transport costs, subsidies and ridership," Transportation Research Part A: Policy and Practice, Elsevier, vol. 87(C), pages 78-89.
    9. Zhang, Chunqin & Xiao, Guangnian & Liu, Yong & Yu, Feng, 2018. "The relationship between organizational forms and the comprehensive effectiveness for public transport services in China?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 783-802.

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    More about this item

    Keywords

    Bus; Cost; Regulation; Transport;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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