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Incompleteness and clarity in bus contracts: Identifying the nature of the ex ante and ex post perceptual divide

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  • Hensher, David A.

Abstract

In the transport sector, many types of contracts exist. Some are very precise, and strive for completeness; others are very [`]light-weight' and are incomplete. Bus and coach contracts, won through competitive tendering or negotiation, are typically incomplete in the sense of an inability to verify all the relevant obligations, as articulated through a set of deliverables. This paper draws on recent experiences in contract negotiation, and subsequent commitment in the bus sector, to identify what elements of the contracting regime have exposed ambiguity and significant gaps in what the principal expected, and what the agent believed they were obliged to deliver. We develop a series of regression models to investigate the extent of discrepancy between the principal and the agents perceived [`]understanding' of contract obligations. The empirical evidence, from a sample of bus operators, is used to identify the extent of perceived incompleteness and clarity across a sample of bus contracts. A noteworthy finding is the important role that a trusting partnership plays in reducing the barriers to establishing greater clarity of contract specification and obligations, and in recognition of the degree of contract completeness.

Suggested Citation

  • Hensher, David A., 2010. "Incompleteness and clarity in bus contracts: Identifying the nature of the ex ante and ex post perceptual divide," Research in Transportation Economics, Elsevier, vol. 29(1), pages 106-117.
  • Handle: RePEc:eee:retrec:v:29:y:2010:i:1:p:106-117
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    References listed on IDEAS

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    1. Stanley, John & van de Velde, Didier, 2008. "Risk and reward in public transport contracting," Research in Transportation Economics, Elsevier, vol. 22(1), pages 20-25, January.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics," Introductory Chapters,in: Robert Gibbons & John Roberts (ed.), : The Handbook of Organizational Economics Princeton University Press.
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    5. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    6. Hensher, David A. & Stanley, John, 2008. "Transacting under a performance-based contract: The role of negotiation and competitive tendering," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(9), pages 1143-1151, November.
    7. Saussier, Stephane, 2000. "Transaction costs and contractual incompleteness: the case of Electricite de France," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 189-206, June.
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    Cited by:

    1. Hensher, David A. & Stanley, John, 2010. "Contracting regimes for bus services: What have we learnt after 20 years?," Research in Transportation Economics, Elsevier, vol. 29(1), pages 140-144.
    2. Merkert, Rico & Hensher, David A., 2013. "Regulation, trust and contractual incentives around transport contracts – Is there anything bus operators can learn from public air service contracts?," Research in Transportation Economics, Elsevier, vol. 39(1), pages 67-78.
    3. Nayan, Ashish & Wang, David Z.W., 2017. "Optimal bus transit route packaging in a privatized contracting regime," Transportation Research Part A: Policy and Practice, Elsevier, vol. 97(C), pages 146-157.

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