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

No 2010:8, Working Papers from Swedish National Road & Transport Research Institute (VTI)

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 (search for similar items in EconPapers)
JEL-codes: L14 R48 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2010-11-03
New Economics Papers: this item is included in nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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