Working papers in Transport Economics
The distance factor in Swedish bus contracts: how far are operators willing to go?
Abstract: One of the factors differentiating operators the most in
bus services is, arguably, the respective distances from their workplaces
to the area of a procured contract. More dead running kilometers implies
higher costs, and the same should affect operators’ probability to
participate in tenders. As previous studies have discussed, this is a
relevant competitive factor, but the transport literature lacks studies
aiming to assess the size of this distance factor. This paper examines what
impact operators’ distance to tendered bus contracts has on their
probability to participate in the tender, and how this probability differs
across operator types. To address this, an econometric analysis was
undertaken using probit regressions with data on tendered Swedish bus
contracts over the period 2007–2015 along with operator workplace data. The
results show that operators’ distance from a contract has a significantly
negative effect on their probability of placing a bid for the contract.
While being located near the contract gives, on average, an over 90 percent
probability of participating, being 10 kilometers away results in a 30
percent probability. The rival’s distance to the contract also has an
effect, but only to a limited extent. Large operators are found to be less
affected by their distance to a contract, and they are also more inclined
to bid if the procuring authority offers a depot to use.
Keywords: Competitive tendering; Distance; Dead running kilometers; Bus; Entry; Competition; Participation; (follow links to similar papers)
JEL-Codes: C35; H57; L11; L16; L91; (follow links to similar papers)
30 pages, November 14, 2017
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