 Implications of the cost of public funds in public transit subsidization and regulationYanshuo Sun, Qianwen Guo, Paul Schonfeld and Zhongfei Li Transportation Research Part A: Policy and Practice, 2016, vol. 91, issue C, 236-250 Abstract: This paper identifies some implications of the cost of public funds (CF) in public transit subsidization and regulation. Regulation is considered because a monopolistic operator is assumed. A social welfare maximization model is proposed, subject to individual rationality and vehicle capacity constraints. Optimality conditions are provided and a key formula is derived about CF’s role in balancing the need to cover the fixed operation cost through fares on the operator’s side and the effort to maintain the user surplus on the passengers’ side. Major findings from this model’s formulation include: (1) CF determines the extent to which the passengers’ surplus is compromised in order to cover the fixed part of the operating cost, and (2) subsidy is unjustified when CF exceeds the critical shadow price of the financial constraint. Analytical relations are illustrated through numerical examples. Keywords: Public transit; Subsidization; Cost of public funds; Social welfare (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:transa:v:91:y:2016:i:c:p:236-250 Ordering information: This journal article can be ordered from DOI: 10.1016/j.tra.2016.06.029 Access Statistics for this article Transportation Research Part A: Policy and Practice is currently edited by John (J.M.) Rose More articles in Transportation Research Part A: Policy and Practice from Elsevier |
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