Contract Renewal as an Incentive Device. An Application to the French Urban Public Transport Sector
AbstractIn the French urban public transport industry, services are often delegated to a private firm by the mean of a fixed-term regulatory contract. This contract specifies the duties of the firm and a financial compensation. When it expires, a new contract is awarded, possibly to a different operator. Cost-plus and fixed-price (gross cost or net cost) contracts are commonly used to regulate the operators in the transport industry. In this paper, we analyse the incentives for the operator to reduce its cost. These incentives come from both the profit maximization during the current contract and the perspective of contract renewal. In our model, the amount of cost-reducing effort depends on the contract type and the time remaining till contract expiration. We use a sample of 124 French urban public transport networks covering the period 1995-2002 to test our predictions. Our proxy for the cost reducing effort is technical efficiency. The data largely confirm the importance of contract type on performances and the incentive effect of contract renewal.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège in its series CREPP Working Papers with number 0805.
Date of creation: 2008
Date of revision:
Contact details of provider:
Postal: Boulevard du Rectorat, 7, Batiment 31, boite 39, 4000 Liege
Phone: + 32 (0) 4 366 31 08
Fax: + 32 (0) 4 366 31 06
Web page: http://www2.ulg.ac.be/crepp/
More information through EDIRC
Other versions of this item:
- Axel Gautier & Anne Yvrande-Billon, 2013. "Contract Renewal as an Incentive Device. An Application to the French Urban Public Transport Sector," Review of Economics and Institutions, Università di Perugia, vol. 4(1).
- GAUTIER, Axel & YVRANDE-BILLON, Anne, 2008. "Contract renewal as an incentive device. An application to the French urban public transport sector," CORE Discussion Papers 2008068, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gagnepain, Philippe & Ivaldi, Marc, 1999.
"Incentive Regulatory Policies: The Case of Public Transit Systems in France,"
IDEI Working Papers
84, Institut d'Économie Industrielle (IDEI), Toulouse.
- Philippe Gagnepain & Marc Ivaldi, 2002. "Incentive Regulatory Policies: The Case of Public Transit Systems in France," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 605-629, Winter.
- Philippe Gagnepain & Marc Ivaldi, 2002. "Incentive Regulatory policies: The Case of Public Transit Systems in France," Post-Print hal-00622846, HAL.
- Gagnepain, P. & Ivaldi, M., 1999. "Incentive Regulatory Policies: the Case of Public Transit Systems in France," Papers 99.515, Toulouse - GREMAQ.
- William Roy & Anne Yvrande-Billon, 2007. "Ownership, Contractual Practices and Technical Efficiency: The Case of Urban Public Transport in France," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 41(2), pages 257-282, May.
- Bajari, Patrick & Tadelis, Steven, 2001.
"Incentives versus Transaction Costs: A Theory of Procurement Contracts,"
RAND Journal of Economics,
The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
- Patrick Bajari & Steven Tadelis, 1999. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," Working Papers 99029, Stanford University, Department of Economics.
- Laffont, Jean-Jacques & Tirole, Jean, 1986.
"Using Cost Observation to Regulate Firms,"
Journal of Political Economy,
University of Chicago Press, vol. 94(3), pages 614-41, June.
- Dalen, Dag Morten & Moen, Espen R & Riis, Christian, 2004.
"Contract Renewal and Incentives in Public Procurement,"
CEPR Discussion Papers
4540, C.E.P.R. Discussion Papers.
- Dalen, Dag Morten & Moen, Espen R. & Riis, Christian, 2006. "Contract renewal and incentives in public procurement," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 269-285, March.
- Dag Dalen & Andres Gómez-Lobo, 2003. "Yardsticks on the road: Regulatory contracts and cost efficiency in the Norwegian bus industry," Transportation, Springer, vol. 30(4), pages 371-386, November.
- Beniamina Margari & Fabrizio Erbetta & Carmelo Petraglia & Massimiliano Piacenza, 2007.
"Regulatory and environmental effects on public transit efficiency: a mixed DEA-SFA approach,"
Journal of Regulatory Economics,
Springer, vol. 32(2), pages 131-151, October.
- Beniamina Buzzo Margari & Fabrizio Erbetta & Carmelo Petraglia & Massimiliano Piacenza, 2006. "Regulatory and Environmental Effects on Public Transit Efficiency. A Mixed DEA-SFA Approach," CERIS Working Paper 200613, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
- Cécile Aubert & Arnaud Reynaud, 2005. "The Impact of Regulation on Cost Efficiency: An Empirical Analysis of Wisconsin Water Utilities," Journal of Productivity Analysis, Springer, vol. 23(3), pages 383-409, 07.
- Massimiliano Piacenza, 2006. "Regulatory Contracts and Cost Efficiency: Stochastic Frontier Evidence from the Italian Local Public Transport," Journal of Productivity Analysis, Springer, vol. 25(3), pages 257-277, 06.
- Amaral, Miguel & Saussier, Stéphane & Yvrande-Billon, Anne, 2009. "Auction procedures and competition in public services: The case of urban public transport in France and London," Utilities Policy, Elsevier, vol. 17(2), pages 166-175, June.
- Kerstens, K., 1996. "Technical efficiency measurement and explanation of French urban transit companies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 30(6), pages 431-452, November.
- Philippe Gagnepain, 1998.
"Structures productives de l'industrie du transport urbain et effets des schémas réglementaires,"
- Philippe Gagnepain, 1998. "Structures productives de l'industrie du transport urbain et effets des schémas réglementaires," Économie et Prévision, Programme National Persée, vol. 135(4), pages 95-107.
- 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, vol. 77(4), pages 453-478, December.
- repec:ner:carlos:info:hdl:10016/5031 is not listed on IDEAS
- De Borger B. & Kerstens K. & Costa A., 2000. "Public transport performance: what do we learn from frontier studies?," Working Papers 2000019, University of Antwerp, Faculty of Applied Economics.
- Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
- Andrea Boitani & Marcella Nicolini & Carlo Scarpa, 2009.
"Do Competition and Ownership Matter? Evidence from Local Public Transport in Europe,"
0911, SIET Società Italiana di Economia dei Trasporti e della Logistica.
- 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.
- Marcella Nicolini & Andrea Boitani & Carlo Scarpa, 2010. "Do Competition and Ownership Matter? Evidence from Local Public Transport in Europe," Working Papers 2010.9, Fondazione Eni Enrico Mattei.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mathieu Lefebvre).
If references are entirely missing, you can add them using this form.