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Applying social marginal cost pricing in rail PPPs: Present state, drawbacks and ways forward

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  • Bernardino, João
  • Hrebícek, Zdenek
  • Marques, Carlos

Abstract

The application of social marginal cost pricing (SMCP) in PPP's in the railway sector faces several challenges. We examine in detail the practical applicability of SMCP in railway PPPs from the perspectives of cost accounting and effectiveness of SMCP towards the allocative efficiency goal, addressing the likely drawbacks in conciliating the welfare objectives of SMCP with the objectives of project financing (cost recovery) and value for money that justify the realization of PPP's. To this end, we combine theoretical analysis with the observation of empirical results of a case study. We split the analysis per type of private service provision, which can be for service operation or infrastructure management. For infrastructure management, we recommend splitting the operator remuneration and the track access charges. For service operation, we argue that the correct decision on source of funding of the service operator should depend on the characteristics of the contract.

Suggested Citation

  • Bernardino, João & Hrebícek, Zdenek & Marques, Carlos, 2010. "Applying social marginal cost pricing in rail PPPs: Present state, drawbacks and ways forward," Research in Transportation Economics, Elsevier, vol. 30(1), pages 59-73.
    • Handle: RePEc:eee:retrec:v:30:y:2010:i:1:p:59-73
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    References listed on IDEAS

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    1. Michael G. Pollitt & Andrew S. J. Smith, 2002. "The restructuring and privatisation of British Rail: was it really that bad?," Fiscal Studies, Institute for Fiscal Studies, vol. 23(4), pages 463-502, December.
    2. Rothengatter, Werner, 2003. "How good is first best? Marginal cost and other pricing principles for user charging in transport," Transport Policy, Elsevier, vol. 10(2), pages 121-130, April.
    3. Vickerman, Roger, 2004. "Maintenance incentives under different infrastructure regimes," Utilities Policy, Elsevier, vol. 12(4), pages 315-322, December.
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    1. Ugo ARRIGO & Giacomo DI FOGGIA, 2014. "Theoretical And Viable Charging Models For Railway Infrastructure Access: An European Survey," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 6(2), pages 5-24, June.

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