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Reducing urban public transport costs by tendering lots: a panel data estimation

Author

Listed:
  • Yves Croissant

    (CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion)

  • William Roy

    (LET - Laboratoire d'économie des transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique)

  • Joan Canton

    (Department of Economics - University of Ottawa [Ottawa])

Abstract

Allotment is, for urban authorities, a governance strategy to reduce public transport costs. It consists of dividing a network into several lots, so as to multiply the number of calls for tender. On the one hand, gains should be obtained by increasing competition for the market and reducing the costs of obtaining accurate information. On the other hand, cutting a network into several parts is also expected to have negative consequences on production costs, in terms of lower returns to scale. Many industry stakeholders believe that the latter element more than compensates for the former. In this article, we estimate a translog cost function with a panel of 141 French urban public transport networks. Our main conclusion is that scale economies are exhausted for a production of about 3 million vehicle-kilometres per year. Therefore, as far as returns to scale are concerned, allotment would reduce the costs of public transport services for the main cities of our sample. A second dividend for allotment is then presented and implies that the assumed trade-off between returns to scale and increased competition is irrelevant.

Suggested Citation

  • Yves Croissant & William Roy & Joan Canton, 2013. "Reducing urban public transport costs by tendering lots: a panel data estimation," Post-Print halshs-01078028, HAL.
    • Handle: RePEc:hal:journl:halshs-01078028
    DOI: 10.1080/00036846.2012.730133
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    6. Mouwen, Arnoud & van Ommeren, Jos, 2016. "The effect of contract renewal and competitive tendering on public transport costs, subsidies and ridership," Transportation Research Part A: Policy and Practice, Elsevier, vol. 87(C), pages 78-89.
    7. Germà Bel & Jordi Rosell, 2016. "Public and Private Production in a Mixed Delivery System: Regulation, Competition and Costs," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(3), pages 533-558, June.
    8. Shiqian Ji & Jiaming Zhong & Zhaocheng He, 2022. "A Bus Subsidy Scheme Design Model Considering Competition between Bus Companies," Sustainability, MDPI, vol. 14(7), pages 1-19, April.

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