Increased patronage for urban bus transport with net-cost contracts
AbstractSimulations of net cost contracts augmented with a subsidy per passenger for public transport bus operators in Sweden indicate that such contracts may shift the operators profit maximising price and frequency combination in a direction that yields an increased patronage. The calculations suggest that a subsidised increase in patronage is welfare improving. The simulations unfortunately also indicate that such contracts may become very costly for the public transport authority. In a system with franchised contracts we however suggest that a large part of these costs may be recovered as a bid for the contract. In this study we can not calculate all the potential adaptations that the operator may undertake to optimise the supply. We therefore conjecture that a net cost contract augmented with a subsidy may well be a reasonable policy to achieve increased patronage.
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Bibliographic InfoPaper provided by Swedish National Road & Transport Research Institute (VTI) in its series Working Papers with number 2010:8.
Length: 13 pages
Date of creation: 03 Nov 2010
Date of revision:
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Postal: VTI, Transport Economics, P.O. Box 6056, SE-171 06 Solna, Sweden
Phone: +46-13-20 40 00
Fax: +46-13-14 14 36
Web page: http://www.vti.se/tek
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incentive contract; public transport; patronage; subsidy;
Find related papers by JEL classification:
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
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