Efficiency among Private Railway Companies in a weakly Regulated System: The Case of Britain's Railways in 1893-1912

This paper uses a stochastic cost frontier model to investigate the
efficiency of Britain’s private railways during the period 1893-1912. We
find that there was substantial inefficiency in the industry with no sign of
reduction over time. Our main conclusion is that principal agent problems
were pervasive in railway management at this time. Our results suggest
that private ownership per se is not sufficient to promote efficiency in the
railway industry; it should be supported by competition for franchises and
price-capping regulation as in the 1990s.