Regulating Public Transit Networks: How Do Urban-Intercity Diversification and Speed-Up Measures Affect Firms' Cost Performance?

34 Pages Posted: 19 Jun 2004

See all articles by Giovanni Fraquelli

Giovanni Fraquelli

University of Eastern Piedmont - A. Avogadro; Italian National Research Council (CNR) - Centre for Economic Research on Firms and Growth (CERIS)

Massimiliano Piacenza

University of Torino - Department of Economics and Statistics

Graziano Abrate

University of Pavia

Abstract

Empirical studies on the cost structure of Public Transit Networks are mainly based on specialized firms providing urban or intercity services. In this study we estimate a translogarithmic variable cost function to assess the behaviour of returns to scale and the impact of network characteristics. The analysis is based on a sample of 45 Italian municipal companies observed from 1996 to 1998 and including both specialized and mixed transit operators. Results confirm previous evidence on the existence of natural monopoly in the industry and support a regulation introducing competitive tenders to access to the market. In addition, we provide insights about the advantages associated with urban-intercity diversification and with the improvement of network commercial speed. Cost benefits can then be achieved by promoting mergers between neighbouring firms, so as to create new companies operating on integrated local networks and supplying in combination urban and intercity public transport. Implications of such a strategy for the design of tender mechanisms are also underlined, together with the need for a regulatory policy which takes more care of speed-up measures.

Suggested Citation

Fraquelli, Giovanni and Piacenza, Massimiliano and Abrate, Graziano, Regulating Public Transit Networks: How Do Urban-Intercity Diversification and Speed-Up Measures Affect Firms' Cost Performance?. Annals of Public & Cooperative Economics, Vol. 75, No. 2, pp. 193-225, June 2004. Available at SSRN: https://ssrn.com/abstract=554938

Giovanni Fraquelli (Contact Author)

University of Eastern Piedmont - A. Avogadro ( email )

Corso Borsalino 50
15100 Alessandria
Italy

Italian National Research Council (CNR) - Centre for Economic Research on Firms and Growth (CERIS) ( email )

Via Avogadro 8
10121 Torino
Italy

Massimiliano Piacenza

University of Torino - Department of Economics and Statistics ( email )

School of Economics
Corso Unione Sovietica 218 bis
Torino, TO 10134
Italy
+39 011 6706188 (Phone)
+39 011 6706062 (Fax)

HOME PAGE: http://web.econ.unito.it/piacenza/

Graziano Abrate

University of Pavia ( email )

Via Strada Nuova, 65
I-27100 Pavia
Italy

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