IDEAS home Printed from https://ideas.repec.org/p/udc/wpaper/wp336.html
   My bibliography  Save this paper

Monopoly, subsidies and the Mohring effect: A synthesis and an extension

Author

Listed:
  • Andrés Gómez-Lobo

Abstract

This paper discusses the recent literature concerning the Mohring effect and the need to subsidize public transport in order to provide optimal frequencies when there is a monopoly provider. We show that all of the results of this literature are special cases of Spence (1975), albeit with a small adjustment in order to take into account the cost structure of frequency provision in the case of public transport. Although in theory there are cases when a monopolist will offer optimal or above optimal levels of frequency without requiring subsidies, we argue that this result is not very relevant from a public policy perspective. Public transport is rarely provided by an unregulated monopolist. Rather, these services are usually provided either by an exclusive operator under regulated fares or by a group of competing operators, with or without fare regulation. We show that in the first case frequency will always be below social optimal level and in the second case frequency may be overprovided under certain conditions particularly if fares are high. The implications of these results are discussed in the conclusions.

Suggested Citation

  • Andrés Gómez-Lobo, 2011. "Monopoly, subsidies and the Mohring effect: A synthesis and an extension," Working Papers wp336, University of Chile, Department of Economics.
    • Handle: RePEc:udc:wpaper:wp336
    as

    Download full text from publisher

    File URL: http://www.econ.uchile.cl/uploads/publicacion/715bc4d96f1f147cb2d851c28e33c20d9a08377f.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, vol. 62(4), pages 591-604, September.
    2. 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.
    3. Ian Savage & Kenneth A. Small, 2010. "A Comment on 'Subsidisation of Urban Public Transport and the Mohring Effect'," Journal of Transport Economics and Policy, University of Bath, vol. 44(3), pages 373-380, September.
    4. 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.
    5. Vladimir Karamychev & Peran van Reeven, 2010. "Oversupply or Undersupply in a Public Transport Monopoly? A Rejoinder and Generalisation," Journal of Transport Economics and Policy, University of Bath, vol. 44(3), pages 381-389, September.
    6. Tomás Serebrisky & Andrés Gómez‐Lobo & Nicolás Estupiñán & Ramón Muñoz‐Raskin, 2009. "Affordability and Subsidies in Public Urban Transport: What Do We Mean, What Can Be Done?," Transport Reviews, Taylor & Francis Journals, vol. 29(6), pages 715-739, January.
    7. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
    8. Leonardo J. Basso & Sergio R. Jara-Díaz, 2010. "The Case for Subsidisation of Urban Public Transport and the Mohring Effect," Journal of Transport Economics and Policy, University of Bath, vol. 44(3), pages 365-372, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rotaris, Lucia & Danielis, Romeo, 2014. "The impact of transportation demand management policies on commuting to college facilities: A case study at the University of Trieste, Italy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 67(C), pages 127-140.

    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. 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.
    3. Zhang, Fangni & Yang, Hai & Liu, Wei, 2014. "The Downs–Thomson Paradox with responsive transit service," Transportation Research Part A: Policy and Practice, Elsevier, vol. 70(C), pages 244-263.
    4. Ljungberg, Anders, 2016. "Marginal cost-pricing in the Swedish transport sector – An efficient and sustainable way of funding local and regional public transport in the future?," Research in Transportation Economics, Elsevier, vol. 59(C), pages 159-166.
    5. Maria Börjesson & Chau Man Fung & Stef Proost & Zifei Yan, 2019. "Do Small Cities Need More Public Transport Subsidies Than Big Cities?," Journal of Transport Economics and Policy, University of Bath, vol. 53(4), pages 275-27-298.
    6. 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).
    7. Moccia, Luigi & Giallombardo, Giovanni & Laporte, Gilbert, 2017. "Models for technology choice in a transit corridor with elastic demand," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 733-756.
    8. Coulombel, Nicolas & Monchambert, Guillaume, 2023. "Diseconomies of scale and subsidies in urban public transportation," Journal of Public Economics, Elsevier, vol. 223(C).
    9. 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.
    10. Rojo, Marta & dell’Olio, Luigi & Gonzalo-Orden, Hernán & Ibeas, Ángel, 2015. "Inclusion of quality criteria in public bus service contracts in metropolitan areas," Transport Policy, Elsevier, vol. 42(C), pages 52-63.
    11. 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.
    12. 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).
    13. Andrés Gomez-Lobo, 2017. "The efficiency case for transit subsidies in the presence of a ‘soft’ budget constraint," Working Papers wp447, University of Chile, Department of Economics.
    14. Börjesson, Maria & Eliasson, Jonas & Rubensson, Isak, 2020. "Distributional effects of public transport subsidies," Journal of Transport Geography, Elsevier, vol. 84(C).
    15. Noto, Claudio, 2020. "Airport slots, secondary trading, and congestion pricing at an airport with a dominant network airline," Research in Transportation Economics, Elsevier, vol. 79(C).
    16. 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.
    17. 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.
    18. Anders Bondemark & Henrik Andersson & Anders Wretstrand & Karin Brundell-Freij, 2021. "Is it expensive to be poor? Public transport in Sweden," Transportation, Springer, vol. 48(5), pages 2709-2734, October.
    19. Chen Yan & Qiong Tong, 2021. "Analysis of the Evolutionary Game between the Government and Urban Rail Transit Enterprises under the Loss-Subsidy Mode: A Case Study of Beijing," Sustainability, MDPI, vol. 13(14), pages 1-21, July.
    20. Sepúlveda, Juan Pablo & Galilea, Patricia, 2020. "How do different payment schemes to operators affect public transport concessions? A microeconomic model," Transport Policy, Elsevier, vol. 93(C), pages 27-35.

    More about this item

    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:udc:wpaper:wp336. 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: Mohit Karnani (email available below). General contact details of provider: https://edirc.repec.org/data/deuclcl.html .

    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.