Reducing urban public transport costs by tendering lots: a panel data estimation

Yves Croissant, William Roy and Joan Canton
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William Roy: LET - Laboratoire d'économie des transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique
Joan Canton: Department of Economics - University of Ottawa [Ottawa]

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Abstract: Allotment is, for urban authorities, a governance strategy to reduce public transport costs. It consists of dividing a network into several lots, so as to multiply the number of calls for tender. On the one hand, gains should be obtained by increasing competition for the market and reducing the costs of obtaining accurate information. On the other hand, cutting a network into several parts is also expected to have negative consequences on production costs, in terms of lower returns to scale. Many industry stakeholders believe that the latter element more than compensates for the former. In this article, we estimate a translog cost function with a panel of 141 French urban public transport networks. Our main conclusion is that scale economies are exhausted for a production of about 3 million vehicle-kilometres per year. Therefore, as far as returns to scale are concerned, allotment would reduce the costs of public transport services for the main cities of our sample. A second dividend for allotment is then presented and implies that the assumed trade-off between returns to scale and increased competition is irrelevant.

Keywords: Allotment; Cost function; GMM; Public transport; Returns to scale (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

Published in Applied Economics, 2013, 45 (26), pp.3711-3722. ⟨10.1080/00036846.2012.730133⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01078028

DOI: 10.1080/00036846.2012.730133

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