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Transport Pricing and Public-Private Partnerships


  • Roger Vickerman


  • Emil Evenhuis


Public-Private Partnerships have become a favoured way of introducing private capital into transport projects whilst maintaining an element of public interest. This paper considers the potential conflicts that might arise between the freedom of the private operator within a PPP and other elements of the public sector’s transport policy. Specifically it tackles the question of the problems that might arise when the public sector wishes to implement a type of price regulation, for example SMC Pricing, which might appear to limit the freedom of the private interest to maximise its value from the PPP according to the contract. The paper demonstrates theoretically the potential inconsistencies between such policies and suggest ways in which they may be overcome. We first briefly discuss Public-Private Partnerships in transport: what are the defining characteristics and what are the main types that exist in the different modes of transport? Next we consider the economics of Public-Private Partnerships, in particular from the viewpoint of incentives. Subsequently we identify and examine the issues that arise when Social Marginal Cost Pricing is to be incorporated in PPPs as a regulation with regard to pricing in the transport sector. Lastly, we investigate the possibilities of resolving these issues.

Suggested Citation

  • Roger Vickerman & Emil Evenhuis, 2010. "Transport Pricing and Public-Private Partnerships," Studies in Economics 1004, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:1004

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    References listed on IDEAS

    1. Pawel Gasiorowski & Marian Moszoro, 2008. "Optimal Capital Structure of Public-Private Joint Ventures," IMF Working Papers 08/1, International Monetary Fund.
    2. Bennett, John & Iossa, Elisabetta, 2006. "Building and managing facilities for public services," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2143-2160, November.
    3. Oliver Hart, 2003. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," Economic Journal, Royal Economic Society, vol. 113(486), pages 69-76, March.
    4. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1127-1161.
    5. Efraim Sadka, 2007. "Public-Private Partnerships: A Public Economics Perspective," CESifo Economic Studies, CESifo, vol. 53(3), pages 466-490, September.
    6. Martimort, David & Pouyet, Jérôme, 2006. "'Build It or Not': Normative and Positive Theories of Public-Private Partnerships," CEPR Discussion Papers 5610, C.E.P.R. Discussion Papers.
    7. repec:hrv:faseco:30727607 is not listed on IDEAS
    8. Grout, Paul A, 1997. "The Economics of the Private Finance Initiative," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 53-66, Winter.
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    Cited by:

    1. Rouhani, Omid M. & Oliver Gao, H. & Richard Geddes, R., 2015. "Policy lessons for regulating public–private partnership tolling schemes in urban environments," Transport Policy, Elsevier, vol. 41(C), pages 68-79.

    More about this item


    Public-private partnerships; Social Marginal Cost Pricing; Incentives; Contracts; EU Transport Policy;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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