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Evaluating Alternative Policy Responses to Franchise Failure: Evidence from the Passenger Rail Sector in Britain


  • Andrew S. J. Smith
  • Phil Wheat


One potential problem with franchising (competitive tendering) is how to deal with situations where the franchisee is unwilling to continue operating the franchise within the contract period. This paper studies the effects of the franchising authority's response to franchise failure in passenger rail in Britain, which saw the affected operators placed onto management or short-term renegotiated contracts for an extended period. We find that operators on management contracts saw a sharp deterioration in efficiency. Further, the contract inefficiency persisted, though was eliminated by competitive refranchising. In contrast, costs for renegotiated franchises were no higher (statistically) than industry best practice. © 2012 LSE and the University of Bath

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  • Andrew S. J. Smith & Phil Wheat, 2012. "Evaluating Alternative Policy Responses to Franchise Failure: Evidence from the Passenger Rail Sector in Britain," Journal of Transport Economics and Policy, University of Bath, vol. 46(1), pages 25-49, January.
  • Handle: RePEc:tpe:jtecpo:v:46:y:2012:i:1:p:25-49

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    References listed on IDEAS

    1. de Palma, André & Kilani, Moez & Lindsey, Robin, 2005. "Congestion pricing on a road network: A study using the dynamic equilibrium simulator METROPOLIS," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 588-611.
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    Cited by:

    1. Wheat, Phill & Smith, Andrew, 2012. "Is the choice of (t−T) in Battese and Coelli (1992) type stochastic frontier models innocuous? Observations and generalisations," Economics Letters, Elsevier, vol. 116(3), pages 291-294.
    2. Phill Wheat & William Greene & Andrew Smith, 2014. "Understanding prediction intervals for firm specific inefficiency scores from parametric stochastic frontier models," Journal of Productivity Analysis, Springer, vol. 42(1), pages 55-65, August.
    3. Odolinski , Kristofer & Smith , Andrew S.J., 2014. "Assessing the cost impact of competitive tendering in rail infrastructure maintenance services: evidence from the Swedish reforms (1999-2011)," Working papers in Transport Economics 2014:17, CTS - Centre for Transport Studies Stockholm (KTH and VTI).

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