1 COST EFFICIENCY AND ASYMETRIC INFORMATION IN THE EUROPEAN RAILWAYS INDUSTRY Miguel Urdánoz 1 Catherine Vibes 2 First version: October 2006 Preliminary Abstract The objective of this article is to analyze European railways' incentives to improve efficiency in the recent liberalization context. We build and estimate a structural model accounting for regulatory pressures faced by the firms. Our model includes demand equations, a capacity constraints and a cost function, in which are specified an exogenous technical efficiency component and an endogenous cost reducing effort parameter. We find a significant positive effect of implementing the reforms on cost reducing activities. Keywords: cost efficiency, asymmetric information, network industries, panel data. JEL codes: L92, L43, L51, C23. 1 GREMAQ, EHESS 2 GREMAQ, EHESS