Incentive Regulatory Policies: The Case of Public Transit Systems in France

Philippe Gagnepain and Marc Ivaldi

RAND Journal of Economics, 2002, vol. 33, issue 4, 605-629

Abstract: We assess the empirical relevance of the new theory of regulation, using a principal-agent framework to study the regulatory schemes used in the French urban transport industry. Taking the current regulatory schemes as given, the model of supply and demand provides estimates for the firms' inefficiency, the effort of managers, and the cost of public funds. It allows us to derive the first-best and second-best regulatory policies for each network and compare them with the actual situation in terms of welfare loss or gain. Fixed-price policies lie between fully informed and uninformed second-best schemes. Cost-plus contracts are dominated by any type of second-best contract. From these results, we may conjecture that fixed-price contracts call for better-informed regulators.

Date: 2002
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Working Paper: Incentive Regulatory policies: The Case of Public Transit Systems in France (2002)
Working Paper: Incentive Regulatory Policies: the Case of Public Transit Systems in France (1999)
Working Paper: Incentive Regulatory Policies: The Case of Public Transit Systems in France (1999)
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