Working papers in Transport Economics
Optimal supply of public transport: subsidising production or consumption or both?
(), Joakim Ahlberg
() and Roger Pyddoke
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.
Keywords: Tendering; Vouchers; Mohring effect; Public transport; (A)symmetric information; (follow links to similar papers)
JEL-Codes: R40; (follow links to similar papers)
32 pages, December 18, 2014
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