Implementing Optimal Supply of Public Transport: The Choice between Tendering and Targeted Subsidies. (1st January 2016)

• Record Type: Journal Article
• Authors: Nilsson, J.-E.; Ahlberg, J.; Pyddoke, R.
• Is Part Of: Journal of transport economics and policy. Volume 50:Number 1(2016:Jan.)
• Page Start: 21
• Page End: 38
• Publication Date: 2016-01-01
• Subjects: Transportation -- Periodicals; 388.05
• Languages: English
• ISSNs: 1754-5951

Abstract

This paper compares two approaches for providing public transport: competitive tendering and targeted subsidies. The subsidy option means that commercial operators charge a fare, and are paid by the public sector principal both per passenger and per bus in service. This is the case since quality (the number of buses) would otherwise be sub-optimal. Under full information, the tendering and targeted subsidies would establish the same welfare-maximising outcome, while subsidies typically are more expensive for taxpayers. The case for targeted subsidies is stronger under an asymmetric information framework.