Abstract

In the past few decades several waves of liberalization have transformed public utility markets, including those characterized by natural monopoly conditions, although the corresponding expected efficiency gains have not been always achieved. Even the most thorough analyses of the underlying economic problems have often focused on the intrinsic pros and the cons of competition, leaving aside the necessary considerations on market and institutional design. In this paper, we argue that the design of competitive processes «for» the market cannot be separated from the appropriate design of incentive schemes to achieve a destre level of quality. In particular, we advocate the use of hard and soft performance indicators and suggest how they could be implemented in the case of local public transport.