The effectiveness of the Spanish urban transport contracts in terms of incentives
We consider a principal-agent model in which the regulator faces a moral hazard problem as he cannot observe the effort exerted by public transit operators. In this context, we analyse the effectiveness of the different urban transport contracts signed by the Spanish Central Government since 1990 in terms of incentives. The main result is that none of these contracts provides the appropriate incentives to public transit operators. Thus, we propose a fixed-quantity contract as an alternative financing mechanism. The fixed-quantity contract is a high-powered incentive contract that allows the regulator to perfectly forecast the amount of public funds to be used in the urban transport system. Moreover, the fixed-quantity contract can be adjusted to attain the equilibrium between incentives and optimal allocation of risk.
Volume (Year): 17 (2010)
Issue (Month): 9 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEL20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEL20|
When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:17:y:2010:i:9:p:913-916. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.