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Mesauring quantity-quality trade-offs in regulation: The Brazilian freigth railways case

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  • Antonio Estache
  • Sergio Perelman
  • Lourdes Trujillo

Abstract

The quantity vs. quality trade-offs in network industries are well known from the theoretical literature and have been the subject of many empirical assessments, although mostly for the telecoms and energy sectors. The purpose of this paper is to expand the evidence for the railway sector by documenting the importance of this trade-off in the context of the Brazilian freight railway industry reform, the first example of a railway sector in which tariff revisions are subject to joint output and quality performance indicators. The analysis is based on the calculation of the Malmquist productivity index proposed byFäre et al. (1995). The decomposable nature of this total factor productivity (TFP) index reveals the prevalence of quantity-quality trade-offs up to the end of the reform period, but a positive correlation between them during the period just afterwards. This type of information would certainly be useful for regulation purposes, particularly as an alternative way of taking into account quality without introducing complex, and very often ineffective, penalty schemes.

Suggested Citation

  • Antonio Estache & Sergio Perelman & Lourdes Trujillo, 2007. "Mesauring quantity-quality trade-offs in regulation: The Brazilian freigth railways case," ULB Institutional Repository 2013/43911, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/43911
    Note: FLWIN
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    Cited by:

    1. Smith, Andrew S.J. & Ojeda Cabral, Manuel, 2022. "Is higher quality always costly? Marginal costs of quality: Theory and application to railway punctuality," Transportation Research Part A: Policy and Practice, Elsevier, vol. 157(C), pages 258-273.
    2. Holvad, Torben, 2020. "Efficiency analyses for the railway sector: An overview of key issues," Research in Transportation Economics, Elsevier, vol. 82(C).
    3. Abate, Megersa & Lijesen, Mark & Pels, Eric & Roelevelt, Adriaan, 2013. "The impact of reliability on the productivity of railroad companies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 51(C), pages 41-49.

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