IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v139y2020icp376-399.html
   My bibliography  Save this article

Misguided quality incentives: The case of the Santiago bus system

Author

Listed:
  • Batarce, Marco
  • Ávila, Franco

Abstract

This article helps explain why incentive-based contracts have failed in some cities. It also explicitly shows how contracted kilometer- and passenger-based payments affect transit service quality. First, we study how contract renegotiations in 2012 and 2013 affected quality related to service kilometers in the bus public transport system of Santiago, Chile. To do that, we analyze the evolution of compliance measures and estimate the effect of renegotiations on key performance indicators. The main results are that the renegotiation of 2012 led to minor improvements in frequency compliance but deterioration in regularity, whereas the renegotiation of 2013 led to reduced fines for non-compliance with no change in frequency compliance and decreased regularity. Second, we formulate a model to analyze the behavior of a firm operating under a contract like the one in Santiago. We identify conditions that must be present for an operator to provide the contracted service kilometers, depending on the per-kilometer and per-passenger payments stipulated in the contract. The results of the analysis are empirically tested, and we conclude that the incentives in Santiago do not sufficiently incentivize contract compliance. A central result is a formula for payment per kilometer and payment per passenger when the objective is the provision of service kilometers.

Suggested Citation

  • Batarce, Marco & Ávila, Franco, 2020. "Misguided quality incentives: The case of the Santiago bus system," Transportation Research Part A: Policy and Practice, Elsevier, vol. 139(C), pages 376-399.
    • Handle: RePEc:eee:transa:v:139:y:2020:i:c:p:376-399
    DOI: 10.1016/j.tra.2020.07.014
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856420306662
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tra.2020.07.014?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrés Gómez-Lobo & Julio Briones, 2014. "Incentives in Bus Concession Contracts: A Review of Several Experiences in Latin America," Transport Reviews, Taylor & Francis Journals, vol. 34(2), pages 246-265, March.
    2. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-641, June.
    3. Beltrán, Pablo & Gschwender, Antonio & Palma, Carolina, 2013. "The impact of compliance measures on the operation of a bus system: The case of Transantiago," Research in Transportation Economics, Elsevier, vol. 39(1), pages 79-89.
    4. Guarda, Pablo & Galilea, Patricia & Handy, Susan & Muñoz, Juan Carlos & Ortúzar, Juan de Dios, 2016. "Decreasing fare evasion without fines? A microeconomic analysis," Research in Transportation Economics, Elsevier, vol. 59(C), pages 151-158.
    5. Batarce, Marco & Muñoz, Juan Carlos & Ortúzar, Juan de Dios, 2016. "Valuing crowding in public transport: Implications for cost-benefit analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 91(C), pages 358-378.
    6. Vigren, Andreas & Pyddoke, Roger, 2020. "The impact on bus ridership of passenger incentive contracts in public transport," Transportation Research Part A: Policy and Practice, Elsevier, vol. 135(C), pages 144-159.
    7. Jansson, Kjell & Pyddoke, Roger, 2010. "Quality incentives and quality outcomes in procured public transport - Case study Stockholm," Research in Transportation Economics, Elsevier, vol. 29(1), pages 11-18.
    8. Muñoz, Juan Carlos & Batarce, Marco & Hidalgo, Dario, 2014. "Transantiago, five years after its launch," Research in Transportation Economics, Elsevier, vol. 48(C), pages 184-193.
    9. 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.
    10. Barnett,William A. & Cornet,Bernard & D'Aspremont,Claude & Gabszewicz,Jean & Mas-Colell,Andreu (ed.), 1991. "Equilibrium Theory and Applications," Cambridge Books, Cambridge University Press, number 9780521392198.
    11. Batarce, Marco & Galilea, Patricia, 2018. "Cost and fare estimation for the bus transit system of Santiago," Transport Policy, Elsevier, vol. 64(C), pages 92-101.
    12. Hensher, David A. & Houghton, Erne, 2004. "Performance-based quality contracts for the bus sector: delivering social and commercial value for money," Transportation Research Part B: Methodological, Elsevier, vol. 38(2), pages 123-146, February.
    13. William Roy & Anne Yvrande-Billon, 2007. "Ownership, Contractual Practices and Technical Efficiency: The Case of Urban Public Transport in France," Post-Print halshs-00107375, HAL.
    14. 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, University of Bath, vol. 41(2), pages 257-282, May.
    15. Muñoz, Juan Carlos & Gschwender, Antonio, 2008. "Transantiago: A tale of two cities," Research in Transportation Economics, Elsevier, vol. 22(1), pages 45-53, January.
    16. David A. Hensher & Ian P. Wallis, 2005. "Competitive Tendering as a Contracting Mechanism for Subsidising Transport: The Bus Experience," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 295-322, September.
    17. David Sappington, 2005. "Regulating Service Quality: A Survey," Journal of Regulatory Economics, Springer, vol. 27(2), pages 123-154, November.
    18. William Roy & Anne Yvrande-Billon, 2007. "Ownership, Contractual Practices and Technical Efficiency: The Case of Urban Public Transport in France," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00107375, HAL.
    19. Hensher, David A. & Ho, Chinh & Knowles, Louise, 2016. "Efficient contracting and incentive agreements between regulators and bus operators: The influence of risk preferences of contracting agents on contract choice," Transportation Research Part A: Policy and Practice, Elsevier, vol. 87(C), pages 22-40.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. He, Dongdong & Guan, Wei, 2023. "Promoting service quality with incentive contracts in rural bus integrated passenger-freight service," Transportation Research Part A: Policy and Practice, Elsevier, vol. 175(C).
    2. Godachevich, Javiera & Tirachini, Alejandro, 2021. "Does the measured performance of bus operators depend on the index chosen to assess reliability in contracts? An analysis of bus headway variability," Research in Transportation Economics, Elsevier, vol. 90(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sheng, Dian & Meng, Qiang, 2020. "Public bus service contracting: A critical review and future research opportunities," Research in Transportation Economics, Elsevier, vol. 83(C).
    2. Sepúlveda, Juan Pablo & Galilea, Patricia, 2020. "How do different payment schemes to operators affect public transport concessions? A microeconomic model," Transport Policy, Elsevier, vol. 93(C), pages 27-35.
    3. Canıtez, Fatih & Çelebi, Dilay & Deveci, Muhammet & Kuvvetli, Yusuf, 2019. "Selecting an optimal contractual payment model for Istanbul's public bus operators using non-linear mathematical programming," Research in Transportation Economics, Elsevier, vol. 76(C).
    4. Tiznado, Ignacio & Galilea, Patricia & Delgado, Felipe & Niehaus, Markus, 2014. "Incentive schemes for bus drivers: The case of the public transit system in Santiago, Chile," Research in Transportation Economics, Elsevier, vol. 48(C), pages 77-83.
    5. João M. Pinto & Mário Coutinho dos Santos & Pedro Verga Matos, 2021. "Contracting Out Public Transit Services: An Incentive Performance-Based Approach," Working Papers de Economia (Economics Working Papers) 02, Católica Porto Business School, Universidade Católica Portuguesa.
    6. 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).
    7. Avenali, Alessandro & Boitani, Andrea & Catalano, Giuseppe & D’Alfonso, Tiziana & Matteucci, Giorgio, 2016. "Assessing standard costs in local public bus transport: Evidence from Italy," Transport Policy, Elsevier, vol. 52(C), pages 164-174.
    8. Mouwen, Arnoud & van Ommeren, Jos, 2016. "The effect of contract renewal and competitive tendering on public transport costs, subsidies and ridership," Transportation Research Part A: Policy and Practice, Elsevier, vol. 87(C), pages 78-89.
    9. Ida, Yoram & Talit, Gal, 2015. "Regulation of public bus services: The Israeli experience," Transport Policy, Elsevier, vol. 42(C), pages 156-165.
    10. Guillermo Díaz & Vincent Charles, 2016. "Regulatory design and technical efficiency: public transport in France," Journal of Regulatory Economics, Springer, vol. 50(3), pages 328-350, December.
    11. Avenali, Alessandro & Boitani, Andrea & Catalano, Giuseppe & D’Alfonso, Tiziana & Matteucci, Giorgio, 2018. "Assessing standard costs in local public bus transport: A hybrid cost model," Transport Policy, Elsevier, vol. 62(C), pages 48-57.
    12. Avenali, Alessandro & Catalano, Giuseppe & D'Alfonso, Tiziana & Matteucci, Giorgio, 2020. "The allocation of national public resources in the Italian local public bus transport sector," Research in Transportation Economics, Elsevier, vol. 81(C).
    13. 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.
    14. 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.
    15. Daniel Albalate & Germà Bel & Joan Calzada, 2010. "Urban transport governance reform in Barcelona," IREA Working Papers 201009, University of Barcelona, Research Institute of Applied Economics, revised Jun 2010.
    16. Germà Bel & Jordi Rosell, 2016. "Public and Private Production in a Mixed Delivery System: Regulation, Competition and Costs," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(3), pages 533-558, June.
    17. Epstein, Bryan & Givoni, Moshe, 2016. "Analyzing the gap between the QOS demanded by PT users and QOS supplied by service operators," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 622-637.
    18. Batarce, Marco, 2016. "Estimation of urban bus transit marginal cost without cost data," Transportation Research Part B: Methodological, Elsevier, vol. 90(C), pages 241-262.
    19. Sun, Yanshuo & Gong, Hengye & Guo, Qianwen & Schonfeld, Paul & Li, Zhongfei, 2020. "Regulating a public transit monopoly under asymmetric cost information," Transportation Research Part B: Methodological, Elsevier, vol. 139(C), pages 496-522.
    20. Godachevich, Javiera & Tirachini, Alejandro, 2021. "Does the measured performance of bus operators depend on the index chosen to assess reliability in contracts? An analysis of bus headway variability," Research in Transportation Economics, Elsevier, vol. 90(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:139:y:2020:i:c:p:376-399. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.