Urban transportation involves imprtant nonlinearities in two ways: in its purpose and in its form of provision. Under such conditions, there is ample room for market failures and it is not surpising that public intervention plays a heavy role. But public policy failures are common too, and many of the issues currently at the forefront of urban transportation policy involve how to make public intervention more beneficial. In particular, to what extent can market mechanisms be relied upon, either unregulated or as models for public activities? In this chapter, we examine the role that economic analysis plays in analyzing such questions.
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