Pricing, cost recovery, and production efficiency in transport: a critique

Rachel Kranton

No 445, Policy Research Working Paper Series from The World Bank

Abstract: The purpose of this paper is to assess the efficacy of optimal pricing formulas for pricing and cost recovery and to develop a general framework within which to analyze the performance of public transport. Five sources of inefficiency in public transport are discussed: (a) the goals of the enterprise or the regulation of its operations; (b) the structure of the output market; (c) the control mechanism between government and the enterprise; (c) the managerial incentive structure; and (d) the conditions of employment. Even when public enterprises are bent on maximizing consumer welfare, costs are not necessarily minimized. Lack of competition may also exacerbate the problem of asymmetric information between owners and managers. Owners of public firms are unlikely to exert pressure on public enterprises to operate efficiently. And public firms may be protected from insolvency by"soft"budget constraints.

Keywords: Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Municipal Financial Management; Public Sector Economics&Finance (search for similar items in EconPapers)
Date: 1990-06-30
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Citations: View citations in EconPapers (1)

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