Merger Analysis and Public Transport Service Contracts

Abstract

An operator that submits an offer for the management of a public service, thereby competing with rivals in the market, must take into account the provisions and criteria of the contract that defines the regulatory environment. Under this competition for the market, the impact of mergers between two operators then depends on the type of contract itself. To remedy the lack of merger guidelines in this case, this chapter introduces a framework based on the optimal regulation theory. The analytical model simultaneously analyzes the choice and the effectiveness of management contracts between an authority and a service operator to better understand how consumers’ welfare depends on the operating conditions of contracts. The econometric analysis validates this approach applied to the urban transport industry in France. Note that it allows detecting significant network effects in this sector, confirming the potential efficiencies that a merger could help achieve.

Keywords

Reference

Philippe Gagnepain, Marc Ivaldi, and Chantal Roucolle, “Merger Analysis and Public Transport Service Contracts”, in Competition and the State, Thomas K. Cheng, Ioannis Lianos, and Daniel Sokol (eds.), May 2014.