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Regulatory Schemes and Political Capture in a Local Public Sector

  • Gagnepain, Philippe
  • Ivaldi, Marc

We consider a framework of contractual interactions between urban transport authorities and transport operators. We estimate simultaneously the choice of contract by the authorities and the effect of regulation on the cost reducing activity of the operators. We test whether regulatory schemes currently implemented in the industry are the observable items of a more general menu of second best contracts. We suggest that the generation process of the data we have in hand is better explained by the political aspects of regulation. Moreover, the cost reducing effort of the operators is greater under fixed-price regimes, compared to the cost-plus case.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-158.

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Date of creation: May 2010
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Handle: RePEc:tse:wpaper:22667
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  1. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
  2. Laffont, Jean-Jacques, 1996. "Industrial policy and politics," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 1-27.
  3. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
  4. Philippe Gagnepain & Marc Ivaldi, 2002. "Incentive Regulatory Policies: The Case of Public Transit Systems in France," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 605-629, Winter.
  5. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Harry F. Campbell, 1975. "Deadweight Loss and Commodity Taxation in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 8(3), pages 441-47, August.
  7. Isabelle Brocas & Kitty Chan & Isabelle Perrigne, 2006. "Regulation under Asymmetric Information in Water Utilities," American Economic Review, American Economic Association, vol. 96(2), pages 62-66, May.
  8. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314, June.
  9. Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
  10. Frank A. WOLAK, 1994. "An Econometric Analysis of the Asymmetric Information, Regulator-Utility Interaction," Annales d'Economie et de Statistique, ENSAE, issue 34, pages 13-69.
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