Wag the Dog: Governing German Rail from a Principal–Agent Perspective

Ever since German Rail, the largest state‐owned enterprise in Germany, was converted into a stock company in 1994, the federal government has been criticized for a lack of policy ambitions. From a principal–agent perspective, the federal government gives the impression of being a reluctant principal. The first objective is therefore to explain the strategic interaction between the federal government and German Rail since the 1990s. The second aim is to increase the explanatory power of the principal–agent concept by adopting a strand of literature in which the principal's unilateralism and diverging preferences—standard assumptions in the principal–agent literature—are complemented by strategic cooperation, confluence, and inverted principal–agent interactions. This conceptual redirection, which considers the impact of a broader range of actors involved, not only explains key events in German rail policy but also highlights the advances of an elaborated principal–agent concept.