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Unconventional factors of efficiency in public transport. A case study and theory

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  • Beria, Paolo
  • Grimaldi, Raffaele

Abstract

In this paper we analyse some possible unconventional factors of efficiency in public transport. The occasion for such analysis rises from a case study in the southern Italian region of Sicily. Most of the regional bus service is here historically franchised to some local private bus companies, without tenders or any other form of competition. The structure of the network has never been planned ex-ante, as it is the result of negotiations among bus companies, local and regional authorities. Though this situation is obviously quite far from indications of the regulation theory, it results in a surprisingly efficient system, with very low unit costs. An analysis of this situation is here carried out in order to understand which factors are forcing those companies to be efficient and which problems this situation may generate. The quality and effectiveness of the offered service is also reckoned. Two factors seem to be most relevant to this results: the relatively low level of subsidies together with the fact of being private operators (rather an exception than a rule in Italy). In order to improve their efficiency, those companies also merged together but eventually split again in the last decades in order to reach a more efficient size and suggesting the presence of possible diseconomies of scale in the sector. Taking for granted that a form of regulation is needed, it is here suggested that regulatory strategies should adapt to this counterintuitive fact and not destroy the incentives already effective in the present situation. Our suggestion is to prefer medium sized tenders rather than large ones, not only for granting more contestability, but also for financial reasons.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29234.

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Date of creation: Apr 2010
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Handle: RePEc:pra:mprapa:29234

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Keywords: regulation; bus; economies of scale; public transport; tender;

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  1. Nash, C A, 1993. "British Bus Deregulation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 103(419), pages 1042-49, July.
  2. Sohail, M. & Maunder, D.A.C. & Cavill, S., 2006. "Effective regulation for sustainable public transport in developing countries," Transport Policy, Elsevier, vol. 13(3), pages 177-190, May.
  3. Anne Yvrande-Billon, 2006. "The Attribution Process Of Delegation Contracts In The French Urban Public Transport Sector: Why Competitive Tendering Is A Myth," Annals of Public and Cooperative Economics, Wiley Blackwell, Wiley Blackwell, vol. 77(4), pages 453-478, December.
  4. C. Cambini & M. Filippini, 2003. "Competitive Tendering and Optimal Size in the Regional Bus Transportation Industry: An Example from Italy," Annals of Public and Cooperative Economics, Wiley Blackwell, Wiley Blackwell, vol. 74(1), pages 163-182, 03.
  5. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, American Economic Association, vol. 60(3), pages 265-83, June.
  6. Costa, Álvaro, 1996. "The organisation of urban public transport systems in Western European metropolitan areas," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 30(5), pages 349-359, September.
  7. Yukihiro Kidokoro, 2003. "The Effects of Price Regulation in Contracting out Transport Services," Journal of Transport Economics and Policy, London School of Economics and University of Bath, London School of Economics and University of Bath, vol. 37(1), pages 111-132, January.
  8. Elisabetta Ottoz & Graziella Fornengo & Marina Di Giacomo, 2009. "The impact of ownership on the cost of bus service provision: an example from Italy," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(3), pages 337-349.
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