Scandinavian Working Papers in Economics
Working Papers,
Swedish National Road & Transport Research Institute (VTI)
No 2010:8: Increased patronage for urban bus transport with net-cost contracts
Roger Pyddoke () and Matts Andersson ()
Additional contact information
Roger Pyddoke: VTI, Postal: Dept. of Transport Economics, P.O. Box 55685, SE-102 15 Stockholm, Sweden
Matts Andersson: WSP, Postal: WSP Analysis & Strategy, Arenavägen 7, 121 88 Stockholm-Globen, Sweden
Abstract: 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.
Keywords: incentive contract; public transport; patronage; subsidy
13 pages, November 3, 2010
Full text files
Paper_6_101007_Pyddoke_Increased_patronage.pdf
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