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Cost and fare estimation for the bus transit system of Santiago

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  • Batarce, Marco
  • Galilea, Patricia

Abstract

This paper studies the costs of the transit system of Santiago, Chile, and proposes pricing schedules to finance it considering a fixed amount of subsidy. We estimate a cost function for the firms providing bus services in Santiago and study their industrial structure. We also estimate a demand model using aggregate data, which delivers information on the demand price elasticity and the effect of other variables related to the supply (e.g., capacity and frequency). Finally, we compute four pricing schedules: uniform price with and without subsidy and two-part tariffs with and without subsidy. Our results show that: (i) the industry exhibits economies of scale when considering both demand-oriented and supply-oriented output measures; (ii) measures of technical efficiency are consistent with the observed exit of firms from the market; (iii) the budget-balanced fare without subsidy is higher than the actual fare, suggesting that subsidies are justified; (iv) the budget-balanced fare with subsidy is higher than the actual fare, suggesting that subsidies are insufficient; (v) two-part tariffs either with or without subsidy are the most effective means of increasing bus travel demand and user welfare; and (vi) a menu of tickets with two options (a uniform price and a two-part tariff) is a Pareto-improving pricing schedule that balances the budget and increases bus travel demand.

Suggested Citation

  • Batarce, Marco & Galilea, Patricia, 2018. "Cost and fare estimation for the bus transit system of Santiago," Transport Policy, Elsevier, vol. 64(C), pages 92-101.
    • Handle: RePEc:eee:trapol:v:64:y:2018:i:c:p:92-101
    DOI: 10.1016/j.tranpol.2018.01.002
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    Cited by:

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    4. Chen, Ruoyu & Zhou, Jiangping, 2022. "Fare adjustment’s impacts on travel patterns and farebox revenue: An empirical study based on longitudinal smartcard data," Transportation Research Part A: Policy and Practice, Elsevier, vol. 164(C), pages 111-133.
    5. Chaparro, Alejandra & Galilea, Patricia & Muñoz, Juan Carlos & Poblete, Joaquín, 2020. "Application of an incentive for bus drivers to achieve an improvement in the quality of service," Research in Transportation Economics, Elsevier, vol. 83(C).
    6. Tirachini, Alejandro & Proost, Stef, 2021. "Transport taxes and subsidies in developing countries: The effect of income inequality aversion," Economics of Transportation, Elsevier, vol. 25(C).
    7. Batarce, Marco & Ávila, Franco, 2020. "Misguided quality incentives: The case of the Santiago bus system," Transportation Research Part A: Policy and Practice, Elsevier, vol. 139(C), pages 376-399.
    8. Luis A. Guzman & Santiago Gomez & Carlos Alberto Moncada, 2020. "Short run fare elasticities for Bogotá’s BRT system: ridership responses to fare increases," Transportation, Springer, vol. 47(5), pages 2581-2599, October.
    9. Sepúlveda, Juan Pablo & Galilea, Patricia, 2020. "How do different payment schemes to operators affect public transport concessions? A microeconomic model," Transport Policy, Elsevier, vol. 93(C), pages 27-35.
    10. Owen Bulla & Juan Carlos Muñoz & Hugo Silva, 2019. "The impact of fare-free public transport on travel behavior: evidence," Documentos de Trabajo 531, Instituto de Economia. Pontificia Universidad Católica de Chile..
    11. Anupriya, & Graham, Daniel J. & Carbo, Jose M. & Anderson, Richard J. & Bansal, Prateek, 2020. "Understanding the costs of urban rail transport operations," Transportation Research Part B: Methodological, Elsevier, vol. 138(C), pages 292-316.

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