The impact of alternative governance forms of regional public rail transport on transaction costs. Case evidence from Germany and Switzerland

This article addresses transaction costs of different governance forms in regional public rail transport by comparing Germany's competitive contract awarding model with Switzerland's direct contract awarding model. We propose a concept of transaction costs with four dimensions, namely the awarding procedure, the institutional framework, provision of system services, and the impact of learning and innovation. We then identify drivers and amounts of transaction costs in both governance forms. In Germany's competitive model, public transport authorities (PTAs) must guarantee effective competition using different instruments, whereas transaction costs are lowered by clear definition and allocation of responsibilities. In Switzerland's cooperative model, costly competition surrogates serve to overcome information asymmetries. An informal and trusting culture of cooperation prevents high transaction costs. Factors such as complexity of different kinds or unforeseen behaviour of PTAs increase transaction costs in any model. Summing up, our results illustrate that transaction costs are no legitimate argument against competition if the high amounts of subsidies are taken into account. Introducing competition for the market in Switzerland's regional public rail transport, however, would be challenging and trigger high one-time reform costs since it would relate to a radical ‘cultural change’.