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Subsidisation of Urban Public Transport and the Mohring Effect

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  • Peran van Reeven

Abstract

Mohring (1972) argues that urban public transport exhibits considerable economies of scale if users' waiting time is included in the cost function. The implication is that without subsidisation, frequencies will be lower than socially optimal. This paper analyses this argument and shows that economies of scale do not constitute a justification for general subsidisation of urban public transport. If an operator is allowed to take the demand effect of their pricing and frequency decisions into account, then the profit-maximising frequency is shown to be at least as high as the welfare-maximising frequency. © 2008 LSE and the University of Bath

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Bibliographic Info

Article provided by London School of Economics and University of Bath in its journal Journal of Transport Economics and Policy.

Volume (Year): 42 (2008)
Issue (Month): 2 (May)
Pages: 349-359

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Handle: RePEc:tpe:jtecpo:v:42:y:2008:i:2:p:349-359

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Web page: http://www.bath.ac.uk/e-journals/jtep

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Cited by:
  1. Albalate, Daniel & Bel, Germà, 2010. "What shapes local public transportation in Europe? Economics, mobility, institutions, and geography," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(5), pages 775-790, September.
  2. Andrés Gómez-Lobo, 2011. "Monopoly, subsidies and the Mohring effect: A synthesis and an extension," Working Papers wp336, University of Chile, Department of Economics.
  3. K. Obeng, 2011. "Indirect production function and the output effect of public transit subsidies," Transportation, Springer, vol. 38(2), pages 191-214, March.
  4. Bar-Yosef, Asaf & Martens, Karel & Benenson, Itzhak, 2013. "A model of the vicious cycle of a bus line," Transportation Research Part B: Methodological, Elsevier, vol. 54(C), pages 37-50.
  5. Angela Stefania Bergantino & Billette de Villemeur, Etienne & Vinella, Annalisa, 2012. "Targeted policy design in transportation: the case of the ferry market," Working Papers 1205, SIET Società Italiana di Economia dei Trasporti e della Logistica, revised 2012.
  6. Anna Černá, 2012. "Economic and Social Harmonization of Sustainable Public Transport," Prague Economic Papers, University of Economics, Prague, vol. 2012(1), pages 83-100.

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