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Congestion, diseconomies of scale and subsidies in urban public transportation

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  • Nicolas Coulombel

    (LVMT - Laboratoire Ville, Mobilité, Transport - IFSTTAR - Institut Français des Sciences et Technologies des Transports, de l'Aménagement et des Réseaux - UPEM - Université Paris-Est Marne-la-Vallée - ENPC - École des Ponts ParisTech)

  • Guillaume Monchambert

    (LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique, UL2 - Université Lumière - Lyon 2)

Abstract

Subsidization of urban public transportation systems is often motivated by economies of scale and/or second-best considerations (underpriced road alternative). We model a public transportation system subject to frictions between users, users and vehicles, and vehicles. We derive the monopolistic and optimal provisions of supply. We show that if demand exceeds a first threshold, the system enters a congested regime and service frequency decreases. If demand exceeds a second threshold, the public transit system operates under diseconomies of scale, calling for a Pigovian tax instead of a subsidy. This finding, which goes against Mohring's classical rule (1972), holds with an untolled road alternative. We estimate the model for the London Piccadilly lane and find evidence of substantial diseconomies of scale during the morning peak, questioning current subsidy policies for the busiest transit lines.

Suggested Citation

  • Nicolas Coulombel & Guillaume Monchambert, 2019. "Congestion, diseconomies of scale and subsidies in urban public transportation," Working Papers hal-02373768, HAL.
    • Handle: RePEc:hal:wpaper:hal-02373768
    Note: View the original document on HAL open archive server: https://hal.science/hal-02373768v2
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    Keywords

    mass transit; congestion; externality; Mohring effect; London Piccadilly lane;
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