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Increased patronage for urban bus transport with net-cost contracts

Listed author(s):
  • Pyddoke, Roger



  • Andersson, Matts



Registered author(s):

    Simulations of net cost contracts augmented with a subsidy per passenger for public transport bus operators in Sweden indicate that such contracts may shift the operators profit maximising price and frequency combination in a direction that yields an increased patronage. The calculations suggest that a subsidised increase in patronage is welfare improving. The simulations unfortunately also indicate that such contracts may become very costly for the public transport authority. In a system with franchised contracts we however suggest that a large part of these costs may be recovered as a bid for the contract. In this study we can not calculate all the potential adaptations that the operator may undertake to optimise the supply. We therefore conjecture that a net cost contract augmented with a subsidy may well be a reasonable policy to achieve increased patronage.

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    Paper provided by Swedish National Road & Transport Research Institute (VTI) in its series Working Papers with number 2010:8.

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    Length: 13 pages
    Date of creation: 03 Nov 2010
    Handle: RePEc:hhs:vtiwps:2010_008
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    VTI, Transport Economics, P.O. Box 6056, SE-171 06 Solna, Sweden

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