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Strategic partnerships in local public transport

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  • Dementiev, Andrei

Abstract

We present a rationale for the delegation of regulatory functions in public transport to a partnership that rebalances social and commercial interests according to an agreed and predetermined objective function. This allows for the improvement of economic efficiency providing a constructive commitment to tariff and subsidy policies. Using a simple model, we determine the optimal corporate structure for such a partnership between the local government and any regulated monopoly. The government's strategic option of using its stake in the partnership to generate budget revenue from sale proceeds and/or dividends encourages the relevant authorities to increase the commercial attractiveness of the joint enterprise by setting appropriate tariffs. We show that such a strategic partnership can lead to improvements in welfare if the local cost of public funds is relatively high. These theoretical findings are then examined through the prism of suburban railway transport reform in Russia.

Suggested Citation

  • Dementiev, Andrei, 2016. "Strategic partnerships in local public transport," Research in Transportation Economics, Elsevier, vol. 59(C), pages 65-74.
  • Handle: RePEc:eee:retrec:v:59:y:2016:i:c:p:65-74
    DOI: 10.1016/j.retrec.2016.07.017
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    References listed on IDEAS

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    More about this item

    Keywords

    Strategic partnerships; Ownership structures; Mixed enterprises; Organisational choice; Delegation; Suburban rail; Russia;

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • 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

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