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Impact of a Cost Minimisation User Cost Model on Public Transport Subsidy

Author

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  • Peter Tisato

    (Department of Economics, University of Adelaide)

Abstract

We show that optimal public transport subsidy is sensitive to the use of alternative user cost models, and that a model based on cost minimisation principles may lead to an improvement in subsidy estimates. For the case of homogeneous consumers and non-peaked demand, the cost minimisation user cost model yields optimal subsidy estimates which differ by up to 55% from those generated by existing'models. Multiple optimal subsidy equilibria may also exist arising from a kink in the user cost schedule at a critical frequency and a resulting discontinuity in the marginal benefit of frequency enhancement schedule

Suggested Citation

  • Peter Tisato, 1991. "Impact of a Cost Minimisation User Cost Model on Public Transport Subsidy," School of Economics and Public Policy Working Papers 1991-05, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:1991-05
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp1991-05.pdf
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    Citations

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    Cited by:

    1. de Palma, André & Lindsey, Robin, 2001. "Optimal timetables for public transportation," Transportation Research Part B: Methodological, Elsevier, vol. 35(8), pages 789-813, September.
    2. Tisato, Peter, 1998. "Service unreliability and bus subsidy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(6), pages 423-436, August.
    3. Fosgerau, Mogens, 2009. "The marginal social cost of headway for a scheduled service," Transportation Research Part B: Methodological, Elsevier, vol. 43(8-9), pages 813-820, September.
    4. Zhang, Junlin & Lindsey, Robin & Yang, Hai, 2018. "Public transit service frequency and fares with heterogeneous users under monopoly and alternative regulatory policies," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 190-208.
    5. de Palma, André & Lindsey, Robin, 2007. "Chapter 2 Transport user charges and cost recovery," Research in Transportation Economics, Elsevier, vol. 19(1), pages 29-57, January.
    6. Peter Tisato, 1997. "User Economies of Scale: Bus Subsidy in Adelaide," The Economic Record, The Economic Society of Australia, vol. 73(223), pages 329-347, December.

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