Optimal performance-based subsidies in Norwegian intercity rail transport

Abstract

A Norwegian White Paper on public transport paved the way for performance-based contracts for passenger rail. In order to estimate socially optimal economic incentives, we have calibrated and used a model which optimises public transport services and subsequently allows us to design incentives for operators that will induce them to provide the proper level of service. Our recommendations for intercity services have been implemented in the 2003 contract between the Norwegian State Railways and the Ministry of Transport and Communications.