IDEAS home Printed from https://ideas.repec.org/p/hhs/ctswps/2014_027.html
   My bibliography  Save this paper

Optimal supply of public transport: subsidising production or consumption or both?

Author

Abstract

This paper compares two approaches for providing public transport: competitive tendering and vouchers. The functioning of tendering is well known. The voucher alternative means that commercial operators charge passengers a fare and are also paid by the public sector principal for each. The paper establishes that it is also necessary to subsidize quality, here referring to the number of busses. Under full information, the two approaches would result in the same welfare maximizing outcome. Vouchers may be more expensive for taxpayers. The case for vouchers is shown to be stronger under an asymmetric information framework.

Suggested Citation

  • Nilsson, Jan-Eric & Ahlberg , Joakim & Pyddoke, Roger, 2014. "Optimal supply of public transport: subsidising production or consumption or both?," Working papers in Transport Economics 2014:27, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    • Handle: RePEc:hhs:ctswps:2014_027
    as

    Download full text from publisher

    File URL: http://www.transportportal.se/swopec/CTS2014-27.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lidestam, Helene, 2014. "Sustainable bus transports through less detailed contracts," Renewable Energy, Elsevier, vol. 61(C), pages 141-146.
    2. Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, vol. 62(4), pages 591-604, September.
    3. Holmgren, Johan, 2013. "The efficiency of public transport operations – An evaluation using stochastic frontier analysis," Research in Transportation Economics, Elsevier, vol. 39(1), pages 50-57.
    4. Ian W. H. Parry & Kenneth A. Small, 2009. "Should Urban Transit Subsidies Be Reduced?," American Economic Review, American Economic Association, vol. 99(3), pages 700-724, June.
    5. Peran van Reeven, 2008. "Subsidisation of Urban Public Transport and the Mohring Effect," Journal of Transport Economics and Policy, University of Bath, vol. 42(2), pages 349-359, May.
    6. David A. Hensher & Ian P. Wallis, 2005. "Competitive Tendering as a Contracting Mechanism for Subsidising Transport: The Bus Experience," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 295-322, September.
    7. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
    8. Pyddoke, Roger & Andersson, Matts, 2010. "Increased patronage for urban bus transport with net-cost contracts," Working Papers 2010:8, Swedish National Road & Transport Research Institute (VTI).
    9. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    10. Jan-Eric Nilsson & Lina Jonsson, 2011. "Lessons From The Tendering Of Railway Services In Sweden.Are Some Contracts Better Than Others?," Articles, International Journal of Transport Economics, vol. 38(1).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sun, Yanshuo & Guo, Qianwen & Schonfeld, Paul & Li, Zhongfei, 2016. "Implications of the cost of public funds in public transit subsidization and regulation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 91(C), pages 236-250.
    2. Andrés Gómez-Lobo, 2011. "Monopoly, subsidies and the Mohring effect: A synthesis and an extension," Working Papers wp336, University of Chile, Department of Economics.
    3. Vigren, Andreas & Pyddoke, Roger, 2020. "The impact on bus ridership of passenger incentive contracts in public transport," Transportation Research Part A: Policy and Practice, Elsevier, vol. 135(C), pages 144-159.
    4. Sergio Jara-Díaz & Antonio Gschwender & Meisy Ortega, 2014. "The impact of a financial constraint on the spatial structure of public transport services," Transportation, Springer, vol. 41(1), pages 21-36, January.
    5. 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.
    6. Lidestam, Helene & Camén, Carolina & Lidestam, Björn, 2018. "Evaluation of cost drivers within public bus transports in Sweden," Research in Transportation Economics, Elsevier, vol. 69(C), pages 157-164.
    7. Angela Stefania Bergantino & Billette de Villemeur, Etienne & Vinella, Annalisa, 2012. "Targeted policy design in transportation: the case of the ferry market," Working Papers 1205, SIET Società Italiana di Economia dei Trasporti e della Logistica, revised 2012.
    8. Pyddoke, Roger & Lindgren, Hanna, 2018. "Outcomes from new contracts with “strong” incentives for increasing ridership in bus transport in Stockholm," Research in Transportation Economics, Elsevier, vol. 69(C), pages 197-206.
    9. Börjesson, Maria & Fung, Chau Man & Proost, Stef & Yan, Zifei, 2018. "Do small cities need more public transport subsidies than big cities?," Working papers in Transport Economics 2018:5, CTS - Centre for Transport Studies Stockholm (KTH and VTI), revised 11 Dec 2018.
    10. Coulombel, Nicolas & Monchambert, Guillaume, 2023. "Diseconomies of scale and subsidies in urban public transportation," Journal of Public Economics, Elsevier, vol. 223(C).
    11. Savage, Ian, 2010. "The dynamics of fare and frequency choice in urban transit," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(10), pages 815-829, December.
    12. Angela Stefania Bergantino & Billette de Villemeur, Etienne & Vinella, Annalisa, 2012. "Targeted policy design in transportation: the case of the ferry market," Working Papers 12_5, SIET Società Italiana di Economia dei Trasporti e della Logistica, revised 2012.
    13. Russo, Antonio & Adler, Martin W. & Liberini, Federica & van Ommeren, Jos N., 2021. "Welfare losses of road congestion: Evidence from Rome," Regional Science and Urban Economics, Elsevier, vol. 89(C).
    14. Tscharaktschiew, Stefan & Reimann, Felix, 2021. "On employer-paid parking and parking (cash-out) policy: A formal synthesis of different perspectives," Transport Policy, Elsevier, vol. 110(C), pages 499-516.
    15. Börjesson, Maria & Fung, Chau Man & Proost, Stef & Yan, Zifei, 2018. "Do buses hinder cyclists or is it the other way around? Optimal bus fares, bus stops and cycling tolls," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 326-346.
    16. Bull, Owen & Muñoz, Juan Carlos & Silva, Hugo E., 2021. "The impact of fare-free public transport on travel behavior: Evidence from a randomized controlled trial," Regional Science and Urban Economics, Elsevier, vol. 86(C).
    17. Börjesson, Maria & Hamilton, Carl J. & Näsman, Per & Papaix, Claire, 2015. "Factors driving public support for road congestion reduction policies: Congestion charging, free public transport and more roads in Stockholm, Helsinki and Lyon," Transportation Research Part A: Policy and Practice, Elsevier, vol. 78(C), pages 452-462.
    18. Tirachini, Alejandro & Proost, Stef, 2021. "Transport taxes and subsidies in developing countries: The effect of income inequality aversion," Economics of Transportation, Elsevier, vol. 25(C).
    19. Li, Shanjun & Liu, Yanyan & Purevjav, Avralt-Od & Yang, Lin, 2019. "Does subway expansion improve air quality?," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 213-235.
    20. Davis, Lucas W., 2021. "Estimating the price elasticity of demand for subways: Evidence from Mexico," Regional Science and Urban Economics, Elsevier, vol. 87(C).

    More about this item

    Keywords

    Tendering; Vouchers; Mohring effect; Public transport; (A)symmetric information;
    All these keywords.

    JEL classification:

    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:ctswps:2014_027. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CTS (email available below). General contact details of provider: http://www.cts.kth.se/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.