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Contract choice, incentives, and political capture in public transport services

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  • Philippe Gagnepain

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)

  • Marc Ivaldi

    () (TSE - Toulouse School of Economics - Toulouse School of Economics)

Abstract

We consider a framework of contractual interactions between public transport authorities and transport operators. We estimate simultaneously the contract choice by the authorities and the effect of regulation on the cost-reducing activity of the operators. We test whether the current regulatory schemes are the observable items of a complex menu of contracts, as proposed by Laffont and Tirole. We suggest that the generation process of the data we have in hand is better explained by a regulatory framework where an unsophisticated regulator is politically motivated. We show how these political preferences shape the contract choice and we shed light on how operating costs are affected. On average, operators' costs are 12.1% lower under fixed-plus regimes, compared to the cost-plus cases.

Suggested Citation

  • Philippe Gagnepain & Marc Ivaldi, 2009. "Contract choice, incentives, and political capture in public transport services," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00622963, HAL.
  • Handle: RePEc:hal:cesptp:hal-00622963
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00622963
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    Cited by:

    1. Xavier d'Haultfoeuille & Philippe Février, 2010. "Identification of a Class of Adverse Selection Models with Contracts Variation," Working Papers 2011-27, Center for Research in Economics and Statistics.

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