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The Effects of Price Regulation in Contracting out Transport Services


  • Yukihiro Kidokoro


Using a model that explicitly considers service quality, this paper focuses on the problem of whether local government should regulate price in contracting out local public transport services. In the case where price is regulated, the outcome is a lower price, higher output, and lower quality. In spite of a decrease in quality, the net consumer surplus is higher when price is regulated. Since the transport firm's profits are higher when price is not regulated, local government and transport firms never reach a ''win-win'' agreement. Consequently, which party has the legal right to determine price is highly significant. © The London School of Economics and the University of Bath 2003

Suggested Citation

  • Yukihiro Kidokoro, 2003. "The Effects of Price Regulation in Contracting out Transport Services," Journal of Transport Economics and Policy, University of Bath, vol. 37(1), pages 111-132, January.
  • Handle: RePEc:tpe:jtecpo:v:37:y:2003:i:1:p:111-132

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    References listed on IDEAS

    1. Verhoef, Erik T. & Rouwendal, Jan & Rietveld, Piet, 1999. "Congestion Caused by Speed Differences," Journal of Urban Economics, Elsevier, vol. 45(3), pages 533-556, May.
    2. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
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    Cited by:

    1. Sakai, Hiroki & Shoji, Kenichi, 2010. "The effect of governmental subsidies and the contractual model on the publicly-owned bus sector in Japan," Research in Transportation Economics, Elsevier, vol. 29(1), pages 60-71.
    2. Maria del Mar Cerban & Maria del Pilar Lopez-Ortega & Mercedes Villanueva & Javier Rojas Andrades, 2004. "Sea Transport Demand in the Mainer Spanish Ports," ERSA conference papers ersa04p617, European Regional Science Association.
    3. Beria, Paolo & Grimaldi, Raffaele, 2010. "Unconventional factors of efficiency in public transport. A case study and theory," MPRA Paper 29234, University Library of Munich, Germany.

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