Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)

Abstract: In this paper we study the effect of contract design on the performance of railway maintenance in Sweden, using a panel data set over the period 2003–2013. The effect of incentive intensity is estimated, showing that the power of incentive schemes improve performance as measured by the number of infrastructure failures. In addition, we show that the structure of the performance incentive schemes has resulted in a reallocation of effort from failures not causing train delays to failures causing train delays, with a substantial increase in the former type of failures. This signals a deteriorating asset condition, which highlights the need to consider the long-term effects of this incentive structure. Overall, this work shows that the design of the incentive structures has a large impact on the performance of maintenance, and that the estimated effects are important to consider when assessing contract designs within this field.

Keywords: Contract design; Incentive intensity; Maintenance; Rail; Infrastructure

JEL-codes: D82; L92

10 pages, First version: September 28, 2016. Revised: May 13, 2019. Earlier revisions: May 13, 2019.

Note: Published in Economics of Transportation, Volume 18, June 2019, Pages 50-59.

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