Contract renewal as an incentive device. An application to the French urban public transport sector

Axel Gautier () and Anne Yvrande-Billon

No 2008068, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In the French urban public transport industry, services are often delegated to a private firm by the mean of a fixed-term regulatory contract. This contract specifies the duties of the firm and a financial compensation. When it expires, a new contract is awarded, possibly to a different operator. Cost-plus and fixed-price (gross cost or net cost) contracts are commonly used to regulate the operators in the transport industry. In this paper, we analyse the incentives for the operator to reduce its cost. These incentives come from both the profit maximization during the current contract and the perspective of contract renewal. In our model, the amount of cost-reducing effort depends on the contract type and the time remaining till contract expiration. We use a sample of 124 French urban public transport networks covering the period 1995-2002 to test our predictions. Our proxy for the cost reducing effort is technical efficiency. The data largely confirm the importance of contract type on performances and the incentive effect of contract renewal.

Keywords: incentive regulation; urban transport; stochastic frontier analysis. (search for similar items in EconPapers)
JEL-codes: L33 L51 L92 (search for similar items in EconPapers)
Date: 2008-12-01
New Economics Papers: this item is included in nep-cta and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Contract Renewal as an Incentive Device. An Application to the French Urban Public Transport Sector (2013)
Working Paper: Contract Renewal as an Incentive Device: An Application to the French Urban Public Transport Sector (2013)
Working Paper: Contract Renewal as an Incentive Device: An Application to the French Urban Public Transport Sector (2013)
Working Paper: Contract Renewal as an Incentive Device. An Application to the French Urban Public Transport Sector (2008)
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