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Implementing Optimal Supply of Public Transport: The Choice between Tendering and Targeted Subsidies

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  • J.-E. Nilsson
  • J. Ahlberg
  • R. Pyddoke

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. © 2016 LSE and the University of Bath

Suggested Citation

  • J.-E. Nilsson & J. Ahlberg & R. Pyddoke, 2016. "Implementing Optimal Supply of Public Transport: The Choice between Tendering and Targeted Subsidies," Journal of Transport Economics and Policy, University of Bath, vol. 50(1), pages 21-38, January.
    • Handle: RePEc:tpe:jtecpo:v:50:y:2016:i:1:p:21-38
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    Cited by:

    1. Pyddoke, Roger & Lindgren, Hanna, 2018. "Outcomes from new contracts with “strong” incentives for increasing ridership in bus transport in Stockholm," Research in Transportation Economics, Elsevier, vol. 69(C), pages 197-206.
    2. Fenling Feng & Tianzuo Zhang & Chengguang Liu & Lifeng Fan, 2020. "China Railway Express Subsidy Model Based on Game Theory under “the Belt and Road” Initiative," Sustainability, MDPI, vol. 12(5), pages 1-16, March.

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