Publications by PSE researchers

We explore empirically the impact of the market sharing collusive practices that were implemented in the French public transportation industry between 1994 and 1999. We build a structural model of bidding markets where innovating firms compete for the market and have the ability to spread the benefits of their innovation through all markets on which they are active. Each local competitive environment shapes the distribution of the prices (the bids) paid by public authorities to transport operators. We recover empirically the distribution of prices and innovation shocks and we show that collusive practices had overall a limited impact on prices. Firms were in reality more interested in avoiding significant financial risks inherent to the activity, as well as the high cost of preparing a tender proposal. As a by-product, we perform a counterfactual analysis that allows us to simulate how an increase in firms' innovation reduces prices significantly.

We study a model of non-cooperative interaction between two infrastructure managers (IMs) for international rail transport. We compare equilibrium access charges when the IMs are unregulated and regulated. We show that cooperation among IMs eliminates double-marginalization to the benefit of passengers and IMs. We also show that the delegation of access charge collection with adequate transfers allows the two IMs to reach efficiency, both in the unregulated and regulated régimes. We study the effect of differences in regulatory policies, and analyze the effect of monopoly power of train operators and competition among high speed and low speed train routes on access charges.

We investigate the impact of different public transport pricing schemes on daily commuting habits. Psychological inertia, car stickiness, complexity aversion, or skewed perception of prices are expected to influence decisions. We build a controlled experiment, where participants make transport decisions and face various public transport tariffs. Our findings indicate that players are rational as they reach the Nash predictions of our model, but cognitive biases inherent to users are also present. Peak/offpeak and two-part tariffs prove to be more successful in encouraging public transit use than flat fare subscriptions, possibly due to a preference for flexibility and the ability to take past experiences into account (congestion and incident) in future travel choices. Thus, this paper suggests that well designed pricing strategies are useful tools to promote public transit use and reduce road congestion.

We attempt to identify and measure knowledge spillovers in the French urban transport sector, which is strongly regulated and where a few large industrial groups are in charge of operating several urban networks. We build and estimate a structural cost model where the service is regulated by a local government and is provided by a single operator. Knowledge spillovers are directly linked to the know-how of a specific group, but they also depend on the incentive power of the regulatory contract which shapes the effort of the local managers. Exerting an effort in a specific network allows a cost reduction in this network, but it also benefits other networks that are members of the same group. We find that diversity of knowledge across operators of the same group improves absorptive capacity and increases the flow of spillovers. Simulation exercises provide evidence of significant reductions in total operating costs following the enlargement of industrial groups.

Cet article exploite l’abrogation de l’amendement Wright en 2014 aux États-Unis pour illustrer les conséquences d’un élargissement du marché pertinent sur la capacité des entreprises `a se coordonner sur un équilibre de Nash. A partir de données sur l’industrie du transport aérien, une procédure d’estimation en double-différences met en lumière la baisse de qualité ́e des prévisions des compagnies aériennes sur les marchés de Dallas après que des services longue distance impliquant l’aéroport Love Field ont été autorisés. Ce résultat suggère que les autorités de la concurrence devraient être prudentes lorsqu’elles se réfèrent à l’équilibre de Nash à la suite de réformes d’expansion du marché

We attempt to identify and measure potential knowledge spillovers in the French urban transport sector, which is strongly regulated and where a few large corporations are in charge of operating several urban networks simultaneously. We build and estimate a structural cost model where the service is regulated by a local government and is provided by a single operator. Knowledge spillovers are directly linked to the know-how of a specific corporation, but they also depend on the incentive power of the regulatory contract which shapes the effort of the local managers. Exerting an effort in a specific network allows a cost reduction in this network, but it also benefit other networks that are members of the same corporation. Our model provides us with estimates of the operators' absorptive capacity, which is their in-house knowledge power in order to optimally benefit from spillovers. We find that diversity of knowledge across operators of a same corporation improves absorptive capacity and increases the flow of spillovers. Simulation exercises provide evidence of significant reductions in total operating cost following the enlargement of industrial groups.

This paper exploits the repeal of the Wright amendment as a natural experiment in order to contribute to the ongoing discussion on how the enlargement of the relevant market affects the ability of firms to coordinate on a Nash equilibrium. Using data on the U.S. air transportation industry, we present a Difference-inDifference procedure which sheds light on the significant loss of accuracy in airlines' predictions in markets originating in Dallas after the Love Field airport started operating long distance services in 2014. This suggests that competition authorities should be careful when they refer to the Nash equilibrium following market expansion reforms.

We study competition in the U.S. airline industry relaxing the Nash equilibrium assumption that airlines are able to predict perfectly the behavior of their competitors. We assess empirically whether an equilibrium is more likely to occur if it is the unique rationalizable outcome. We find that equilibria of short distance routes with high traffic and low concentration are the most fragile, and low-cost companies appear detrimental to their occurrence. Our analysis is applied to the measurement of welfare gains from firms’ entry, and to the characterization of the relevant market when some products are unobserved.

We consider contracts for public transport services between a public authority and a transport operator. We build a structural endogenous switching model where the contract choice results from the combined effects of the incentivization scheme aimed at monitoring the operator's efficiency and the political agenda followed by the regulator to account for the voice of private interests. Our results support theoretical predictions as they suggest that cost-plus contracts entail a higher cost for society than fixed-price contracts but allow the public authority to leave a rent to a subset of individuals. Accounting for transfers to interest groups in welfare computations reduces the welfare gap between cost-plus and fixed-price regimes.

The Framework programmes created by the European Union are the main financial tools used to support cooperative R&D activities in the EU. Unlike previous empirical studies, this paper suggests that their impact on firms’ competitiveness is significant. We analyze industry-oriented research joint ventures supported by the Fifth European Framework Programme between 1998 and 2002. A key feature of this Programme is that funding is available to the firms based on social and economic concerns instead of pure performance criteria, which guarantees that financial support is not granted conditional on technological opportunities. This allows us to identify the causal effect of the programme on firms’ performance using the funding available to the firms in their respective industries as a source of exogenous variation in the decision to participate in the programme. Our results suggest that participation in research projects may raise labor productivity by at least 44.4% while it has very limited effect on profit margin.

We propose merger guidelines for bidding markets through the construction of a simple test. It is applied in the particular context of the French urban transport industry. It designs the optimal auction and captures two opposite forces at stake: on the one hand, the optimal auction is biased against a merger due to a loss of competition; on the other hand, potential efficiency gains bias the optimal allocation towards the merger firm. The two effects can be nested in a single equation condition which determines whether the merger improves the consumer net surplus. We suggest that the merger between Transdev and Veolia is consumer surplus improving if the efficiency gains from the merger allow both firms to decrease their initial costs inability by at least 17.9% and 17.8% respectively.