Stochastic Frontiers and Asymmetric Information Models

This article suggests that the global inefficiency which generally affects a production process is endogenous and depends on the incentives generated by the process environment. We propose to treat the usual correlation between the inefficiency and the regressors of the production frontier through the economic constraints that interfere on the activity of the producer

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

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.Publicad

Contract choice, incentives and political capture in public transport services

We consider a framework of contractual interactions between urban transport authorities and transport operators. We estimate simultaneously the choice of contract by the authorities and the effect of regulation on the cost reducing activity of the operators. We test whether regulatory schemes currently implemented in the industry are the observable items of a more general menu of second best contracts. We suggest that the generation process of the data we have in hand is better explained by the political aspects of regulation. Moreover, the cost reducing effort of the operators is greater under fixed-price regimes, compared to the cost-plus case

Contract choice, incentives and political capture in public transport services

We consider a framework of contractual interactions between urban transport authorities and transport operators. We estimate simultaneously the choice of contract by the authorities and the effect of regulation on the cost reducing activity of the operators. We test whether regulatory schemes currently implemented in the industry are the observable items of a more general menu of second best contracts. We suggest that the generation process of the data we have in hand is better explained by the political aspects of regulation. Moreover, the cost reducing effort of the operators is greater under fixed-price regimes, compared to the cost-plus case.

Eliciting the Regulation of an Economic System: The Case of the French Rail Industry

Based on the modern theory of regulation, the analysis aims to characterize the effective economic regulation of the French railway industry. The methodology consists in econometrically testing various scenarios of regulation and determining which of these best fits the data. Using aggregate data on the overall passenger traffic for the incumbent French rail operator (RO), SNCF, the two behavioral hypotheses of reference which we consider –absence of regulation of the rail operator which acts as a pure monopoly, and price regulation of services supplied by the RO– are both statistically significant and do not subtract from each other. This result is certainly related to the fact that passenger services include both high speed train services, for which the RO has some entrepreneurial freedom, and regional transport services, which are regulated by local authorities. In any case however, as the presence of unobservable efforts exerted by the RO to improve its productivity is statistically relevant, one concludes that the RO is not fully and properly regulated. This emphasizes that the design of policy reforms must account for the incentives they create on the RO. The analysis also shows that the most statistically significant scenarios are the ones in which the access tariff imposed by the infrastructure manager is such that the revenue generated by the access tariff is equal to the infrastructure spending. The pricing of the access to the infrastructure network therefore does not seem to be governed by economic principles, but more by budget considerations. While data limitations does neither allow to understand all the facets of a complex reality, nor to claim a high level of precision in the measure of all the parameters of interest, we believe however that we provide an objective methodology to characterize the optimal economic policies for the railway sector, in particular because it yields realistic estimates of the main structural parameters. Indeed the empirical results suggest that the railway industry as a whole exhibits increasing returns to scale, which incidentally is not compatible with the presence of multiple firms. In addition, the elasticity of demand for railway transport is relatively high, an indication of the competitive constraints this mode of transport faces from other transport modes or induced traffic.Regulation, Asymmetric information, Railroad industry

Contract choice, incentives, and political capture in public transport services

We consider a framework of contractual interactions between public transport authorities and transport operators. We estimate simultaneously the contract choice by the authorities and the effect of regulation on the cost-reducing activity of the operators. We test whether the current regulatory schemes are the observable items of a complex menu of contracts, as proposed by Laffont and Tirole. We suggest that the generation process of the data we have in hand is better explained by a regulatory framework where an unsophisticated regulator is politically motivated. We show how these political preferences shape the contract choice and we shed light on how operating costs are affected. On average, operators' costs are 12.1% lower under fixed-plus regimes, compared to the cost-plus cases.

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

This paper is aimed at assessing the empirical relevance of the new theory of regulation. It relies on a principal-agent framework for studying 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 deriving the first-best and second-best regulatory policies for each network and comparing them with the actual situation in terms of welfare loss or gain. Fixed-price policies are lying 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 prices contracts call for better informed regulators.