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Increased patronage for urban bus transport with net-cost contracts


  • Pyddoke, Roger

    () (VTI)

  • Andersson, Matts

    () (WSP)


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.

Suggested Citation

  • 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).
  • Handle: RePEc:hhs:vtiwps:2010_008

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    Cited by:

    1. Ida, Yoram & Talit, Gal, 2015. "Regulation of public bus services: The Israeli experience," Transport Policy, Elsevier, vol. 42(C), pages 156-165.
    2. 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).

    More about this item


    incentive contract; public transport; patronage; subsidy;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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