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“The War For The Fare”: How Driver Compensation Affects Bus System Performance

Author

Listed:
  • Ryan M. Johnson
  • David H. Reiley
  • Juan Carlos Muñoz

Abstract

Prior to 2007, two systems of bus driver compensation coexisted in Santiago, Chile: one paid drivers per passenger transported, while the other paid a fixed wage. Per-passenger drivers engaged in “The War for the Fare,” altering their driving patterns to compete for passengers. Examining these systems on similar routes in Santiago, we observed two key findings. Compared with the fixed-wage system, the per-passenger system leads to (1) 13% shorter passenger wait times, via reduced bunching of buses and (2) 67% more accidents per kilometer driven, via more aggressive driving. We discuss implications for the design of incentives in public transit . ( JEL L92, M52, R41)

Suggested Citation

  • Ryan M. Johnson & David H. Reiley & Juan Carlos Muñoz, 2015. "“The War For The Fare”: How Driver Compensation Affects Bus System Performance," Economic Inquiry, Western Economic Association International, vol. 53(3), pages 1401-1419, July.
    • Handle: RePEc:bla:ecinqu:v:53:y:2015:i:3:p:1401-1419
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    File URL: http://hdl.handle.net/10.1111/ecin.2015.53.issue-3
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    Citations

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    Cited by:

    1. Herrera, Fernanda & López, Sergio I., 2022. "Bus drivers in competition: A directed location approach," Research in Transportation Economics, Elsevier, vol. 95(C).
    2. Jared Rubin & Anya Samek & Roman M. Sheremeta, 2018. "Loss aversion and the quantity–quality tradeoff," Experimental Economics, Springer;Economic Science Association, vol. 21(2), pages 292-315, June.
    3. Cardella, Eric & Roomets, Alex, 2022. "Pay distribution preferences and productivity effects: An experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    4. Jared Rubin & Anya Samek & Roman M. Sheremeta, 2016. "Incentivizing Quantity and Quality of Output: An Experimental Investigation of the Quantity-Quality Trade-off," Working Papers 16-01, Chapman University, Economic Science Institute.
    5. Daniel Jones & Mirco Tonin & Michael Vlassopoulos, 2018. "Paying for what kind of performance? Performance pay and multitasking in mission-oriented jobs," Working Papers 123, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
    6. Leif Sörensen & Jan Schlüter, 2021. "How do contract types and incentives influence driver behavior?−An analysis of the Kigali bus network," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-11, December.
    7. Ramírez, Vicente & Galilea, Patricia & Poblete, Joaquín & Silva, Hugo E., 2022. "Team-based incentives in transportation firms: An experiment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 164(C), pages 1-12.
    8. Zhou, Chang & Tian, Qiong & Wang, David Z.W., 2022. "A novel control strategy in mitigating bus bunching: Utilizing real-time information," Transport Policy, Elsevier, vol. 123(C), pages 1-13.

    More about this item

    JEL classification:

    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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