Gustavo Nombela

Flexible-Term Contracts for Road Franchising

Private participation in road projects is increasing around the world. The most popular franchising mechanism is a concession contract, which allows a private firm to charge tolls to road users during a pre-determined period in order to recover its investments. Concessionaires are usually selected through auctions at which candidates submit bids for tolls, payments to the government, or minimum term to hold the contract. This paper discusses, in the context of road franchising, how this mechanism does not generally yield optimal outcomes and it induces the frequent contract renegotiations observed in road projects. A new franchising mechanism is proposed, based on flexible-term contracts and auctions with bids for total net revenue and maintenance costs. This new mechanism improves outcomes compared to fixed-term concessions, by eliminating traffic risk and promoting the selection of efficient concessionaires.

Effects of Public Ownership over Firms' Size and Overstaffing Problems

A model is presented to analyse the impact ofownership over the problem of excess of employmentgenerally found in public firms. A government has toprovide a service or build an infrastructure, underuncertainty about the valuation of the project byconsumers. Three possible ownership schemes areconsidered for the provision of this service: astate-owned firm, a private firm with a completecontingent contract, or a private firm with anincomplete contract. In all three schemes, the agentthat chooses the size of the project is always thegovernment, without any asymmetries of information.Even though multiple solutions are feasible and nodefinitive conclusion is found to be valid for allstates of nature, an evaluation of outcomes shows thata private firm tends to underprovide infrastructure orservices more often, while under public ownership thefirm is typically larger. If incomplete contracting isadded to the private firm case, the model exhibitssolutions in which outcomes could be socially worsethan those obtained by a public firm. Only changes inthe voting behaviour of workers and contracting costsare required in this model to derive these results.Thus, the paper provides an example that ownershipper se may have an effect on the size andefficiency of firms, even under symmetric informationconditions, an extreme that has been generally deniedin the literature on public firms and privatisation.

Airport Congestion in EU: More Investment or Better Pricing?

Airport congestion has been generally dealt in the literature in a similar fashion as road congestion. However, the phenomenon is quite different, because entry at airports is not random. Flight delays are a consequence of system overload, which is linked to profit maximization decisions of airports and airlines. Moreover, airport congestion exhibits a cascade-type of effect not present in roads: one single delay may generate congestion accumulating over the next hours. Therefore, congestion costs depend on the time of the day which is studied. This paper analyzes airport congestion from this perspective, arguing that a combination of peak-load pricing and investments in new capacity is probably not the best solution to airport congestion. A theoretical model shows that a pricing system based on congestion fees both for airlines and airports could do a better job to mitigate EU congestion costs. Data from flight delays at Madrid airport are used to illustrate our results.