Welfare Tradeoffs in U.S. Rail Mergers

Marc Ivaldi and Gerard McCullough

No 10-196, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: The renegotiation of regulatory contracts is known to prevent regulators from achieving the full commitment efficient outcome in dynamic contexts. However, assessing the cost of such renegotiation remains an open issue from an empirical viewpoint. To address this question, we fit a structural principal-agent model with renegotiation on a set of urban transport service contracts. The model captures two important features of the industry. First, only two types of contracts are used in practice (fixed-price and cost-plus). Second, subsidies increase over time. We compare a scenario with renegotiation and a hypothetical situation with full commitment. We conclude that the welfare gains from improving commitment would be significant but would accrue mostly to operators.

JEL-codes: L11 L13 L41 L92 (search for similar items in EconPapers)
Date: 2010-09
New Economics Papers: this item is included in nep-com, nep-ind, nep-reg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Welfare Tradeoffs in U.S. Rail Mergers (2010)
Working Paper: Welfare Trade-Offs in US Rail Mergers (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:23459

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