| Abstract: | Following the 1993 Railways Act, British Rail's passenger business was spilt into 25 train operating units, which have been privatised by a process of franchising. This paper will review the franchising experience to date. First, the results of 38 in-depth interviews with potential bidders for the passenger businesses will be described. Secondly, a hypothetical bidding game, based on a series of Stated Preference experiments undertaken by our sample of potential bidders, will be described. A model has been established which determines managers' preferences with respect to contract size and length, exclusivity, and the degree of regulatory control. Given assumptions concerning the degree of competition for rail franchises and bidding behaviour, some predictions are made about the likely magnitude of winning bids and these predictions are validated against actual bids. |
