Cost Efficiency in Regional Bus Companies: An Application of Alternative Stochastic Frontier Models

Mehdi Farsi, Massimo Filippini and Michael Kuenzle ()
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Michael Kuenzle: Center for Energy Policy and Economics CEPE, Department of Management, Technology and Economics, ETH Zurich, Switzerland

No 04-33, CEPE Working paper series from CEPE Center for Energy Policy and Economics, ETH Zurich

Abstract: This paper evaluates cost and scale efficiencies of Switzerland’s regulated bus companies operating in regional networks. The adopted methodology can be used in benchmarking analyses applied to incentive regulation systems. Moreover, the estimations can be used to evaluate the bidding offers for the tendering processes predicted by the ongoing reform policies. Since these companies operate in different regions with various characteristics that are only partially observed, it is crucial for the regulator to distinguish between inefficiency and exogenous heterogeneity that influences the costs. A number of stochastic cost frontier models are applied to a panel of 94 companies over a 12-year period from 1986 to 1997. The main focus lies on the ability of these models to distinguish inefficiency from the unobserved firmspecific heterogeneity in a network industry. The estimation results are compared and the effect of unobserved heterogeneity on inefficiency estimates is analyzed.

Pages: 21 pages
Date: 2004-07
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Cost Efficiency in Regional Bus Companies: An Application of Alternative Stochastic Frontier Models (2006)
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