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Title: The effectiveness of the Spanish urban transport contracts in terms of incentives
Authors: Socorro, M. Pilar 
de Rus, Ginés 
Keywords: Bus Deregulation
Asymmetric Information
Policy, et al
Issue Date: 2010
Publisher: 1350-4851
Journal: Applied Economics Letters 
Abstract: We consider a principal-agent model in which the regulator faces a moral hazard problem as he cannot observe the effort exerted by public transit operators. In this context, we analyse the effectiveness of the different urban transport contracts signed by the Spanish Central Government since 1990 in terms of incentives. The main result is that none of these contracts provides the appropriate incentives to public transit operators. Thus, we propose a fixed-quantity contract as an alternative financing mechanism. The fixed-quantity contract is a high-powered incentive contract that allows the regulator to perfectly forecast the amount of public funds to be used in the urban transport system. Moreover, the fixed-quantity contract can be adjusted to attain the equilibrium between incentives and optimal allocation of risk.
ISSN: 1350-4851
DOI: 10.1080/13504850802584815
Source: Applied Economics Letters[ISSN 1350-4851],v. 17, p. 913-916
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