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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 - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Marc Ivaldi

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

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," Working Papers hal-00622963, HAL.
    • Handle: RePEc:hal:wpaper:hal-00622963
    Note: View the original document on HAL open archive server: https://hal.science/hal-00622963
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    References listed on IDEAS

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    Cited by:

    1. Xavier d'Haultfoeuille & Philippe Février, 2011. "Identification of a Class of Adverse Selection Models with Contracts Variation," Working Papers 2011-27, Center for Research in Economics and Statistics.
    2. Paun Iulian Gabriel, 2017. "The Effects Of The Economic Crisis On European Financial Integration And Economic Growth," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 265-274, August.

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