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Crowding-in or crowding out: An empirical analysis on the effect of subsidies on individual willingness-to-pay for public transportation

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  • Drevs, Florian
  • Tscheulin, Dieter K.
  • Lindenmeier, Jörg
  • Renner, Simone

Abstract

Public transportation throughout the world is highly subsidized. User knowledge about public subsidies may affect their willingness to pay for public transport services and alter demand and related passenger fare revenues. This is especially relevant in view of the increasing availability of information about public subsidies. An empirical study reveals a crowding-in effect, on average, on WTP (willingness to pay) as a result of access to information about public subsidies that generates concerns of fairness. Crowding-out effects also occur, caused by considerations of double financing and free-riding, although they are minor. Study results show that public transportation companies as well as financing institutions should highlight the existence of subsidies to produce crowding-in effects in the WTP for public transportation, to maximize public valuation (WTP) of public transportation. This should increase self-generated revenues of public transportation services.

Suggested Citation

  • Drevs, Florian & Tscheulin, Dieter K. & Lindenmeier, Jörg & Renner, Simone, 2014. "Crowding-in or crowding out: An empirical analysis on the effect of subsidies on individual willingness-to-pay for public transportation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 59(C), pages 250-261.
  • Handle: RePEc:eee:transa:v:59:y:2014:i:c:p:250-261
    DOI: 10.1016/j.tra.2013.10.023
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    1. Huang, Di & Liu, Zhiyuan & Liu, Pan & Chen, Jun, 2016. "Optimal transit fare and service frequency of a nonlinear origin-destination based fare structure," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 96(C), pages 1-19.
    2. Merkert, Rico & Beck, Matthew, 2017. "Value of travel time savings and willingness to pay for regional aviation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 96(C), pages 29-42.
    3. Kaplan, Sigal & de Abreu e Silva, João & Di Ciommo, Floridea, 2014. "The relationship between young people׳s transit use and their perceptions of equity concepts in transit service provision," Transport Policy, Elsevier, vol. 36(C), pages 79-87.

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