A proxy cost model for tramway services

In this paper, we build a proxy cost model for tramway services. we estimate separately: (i) transport services production costs; (ii) infrastructure costs; (iii) maintenance costs; (iv) administrative and general costs and (v) the cost of capital. we apply the proposed methodology to estimate the standard cost of italian tramway services. detailed data about costs, technical and environmental characteristics were collected by means of questionnaires sent to italian companies providing 100% of tramway services in 2012. we perform a simulation study in order to highlight the marginal impact of efficiency gains obtained by manipulating cost-driving variables both under the control of the operators (trains and drivers productivity) and of the local authority who assigns the service (number of train revenue kilometers (trK) assigned within the service contract, average fleet age). the simulations show how the local authority should allocate extra resources if it wants to increase the quality-quantity mix of tramway services. our results might help the decision-maker to define the maximum economic compensation (auction base) in competitive tendering procedures or a benchmark for the bargaining with the local monopolist.