Optimal Performance-Based Subsidies in Norwegian Intercity Rail Transport

A White Paper on public transport issued by the Norwegian government in 2002 paved the way for performance-based contracts for passenger rail. This article presents the development of a model which optimizes public transport services and subsequently allows for the design of incentives for operators that will induce them to provide the proper level of service. The model was designed to estimate socially optimal economic incentives. The model covers passenger incentives, train production, capacity, punctuality, cancellations, and overall financial limits. A main feature of the contract is the fact that incentives paid for train kilometer and for seat kilometer production internalize existing passengers' benefit from increased service frequency and reduced crowding, respectively, into the operator's financial decision criteria. Passenger incentives also correct for the fact that the government is regulating fares. The authors note that their recommendations for intercity services were implemented in the 2003 contract between the Norwegian State Railways (NSB, a state-owned limited company) and the Ministry of Transport and Communications (MoT).

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  • Authors:
    • Fearnley, Nils
    • Bekken, Jon-Terje
    • Norheim, Bard
  • Publication Date: 2004


  • English

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  • Accession Number: 01003049
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Aug 4 2005 12:01PM