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Expense preference behavior in public transit systems

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  • Obeng, K.

Abstract

This paper extends previous works that view transit systems as minimizing their after-subsidy costs. The paper uses the expense preference behavior model in economics and derives first-order conditions for the manager. From the first-order conditions, the paper formally shows that the decomposition of relative price inefficiency between management behavior and subsidies found in the work of Sakano et al. (1997) can be derived from a utility maximizing model, thus placing that decomposition within the shadow price literature. Extensions to the models to calculate expense preference are also presented. The results of the estimated models show that transit systems have expense preference for capital and not labor. This expense preference behavior increases total costs by about 15% and capital subsidies by about 20%.

Suggested Citation

  • Obeng, K., 2000. "Expense preference behavior in public transit systems," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 36(4), pages 249-265, December.
    • Handle: RePEc:eee:transe:v:36:y:2000:i:4:p:249-265
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    Cited by:

    1. K. Obeng & R. Sakano, 2000. "The Effects of Operating and Capital Subsidies on Total Factor Productivity: A Decomposition Approach," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 381-397, October.
    2. K. Obeng, 2011. "Indirect production function and the output effect of public transit subsidies," Transportation, Springer, vol. 38(2), pages 191-214, March.
    3. Obeng, K., 2010. "The Deadweight Costs of Public Transit Subsidies," 51st Annual Transportation Research Forum, Arlington, Virginia, March 11-13, 2010 207240, Transportation Research Forum.
    4. Obeng, Kofi, 2010. "The Deadweight Costs of Operating and Capital Subsidies," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 49(1).
    5. Deb, Kaushik & Filippini, Massimo, 2011. "Estimating welfare changes from efficient pricing in public bus transit in India," Transport Policy, Elsevier, vol. 18(1), pages 23-31, January.

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