Tendering Ferry Services in Norway: Ratchet Effects?
Fjord crossings by ferries are vital in the Norwegian trunk road system. The ferries areoperated by ferry companies, each ferry company being a monopolist on a bundle ofcrossings. The government regulates prices and service frequencies and awards subsidies tothe companies in order to make the ferry services economically viable. Tendering has beensuggested as a means to induce cost efficiency and thus reduce costly subsidies. In order togain experience with tendering on this area, this regime has recently been introduced on afew selected crossings. We argue that this small-scale experiment may not reveal the costsavings that may be obtained by a large-scale experiment. This is due to a ratchet effect: Theincumbent ferry companies may not have the incentives to submit low tenders as by doing so,the ferry companies reveals that there is much to gain for the government by carrying througha large-scale tender competition in the future. Such a large-scale tender competition may beharmful to the companies as compared to status quo. Realising this, each company may bereluctant to submit low tenders in the competition for the selected tender crossings.
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|Type of publication:||Article|
|Type of publication (narrower categories):||Congress Report|
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