Public transport

Question 1

what is the main alternative to cars?

Answer 1

public transport

-4.3bn trips by bus per year in England

Question 2

what is the economics of public transport

Answer 2

public transport consume many resources

there are key variables we must consider
- density and f(x) of service

Question 3

what are the OC of public transport

Answer 3

Operator & infrastructure costs: •Infrastructure:tracks,depots…
•Rollingstock(vehicles)
•Operating costs: personnel, energy, fuel, maintenance

Question 4

what are the UC of public transport?

Answer 4

Access time
- time required to access a vehicle –> distance between stops

Waiting time
- depends on service frequency

in-vehicle time

• depends on network conditions (crowding)
• in behicle conditions(crowding)

Fare is NOT a UC, since its just a TRANSFER from users to operator

Question 5

what are the estimates of value of time? not important

Answer 5

Access time: 20£
Waiting time at station: 25£
waiting time at home: 7.5£
in vehicle time: 15£

Question 6

what are the 2 economies of scale

Answer 6

Economies of density: more vehcicles-kms
for given network size
Economies of size: more links to the network

Question 7

draw a diagram representing economies of scale

Answer 7

MC

AC(q)

Question 8

how does Public transport exhibit economies of scale

Answer 8

economies of density

• EOS by expanding density of output
• more vehicles on the road

Question 9

whats a trade-off with optimizing frequency

Answer 9

trade-off with cost with the operator

• reduces time for users and crowding
• but OC will increase

Question 10

what did Mohring say about transport frequency

Answer 10

when time.cost is taken into account there will be EOS in oublic transport
- OC cant display this

Question 11

draw the optimal f(x) fiagram

Answer 11

cp= total cost for a public transport operator

cb = the indifference curve

• optimal f(x) cost of marginal increasing f(x) = mb, through reduced time
• benefit from reduced time increases with the number of users

Question 12

what is the square root rule?

Answer 12

doubling q passengers, 40% HIGHER OPTIMAL F(X)

Question 13

what is economies of density

Answer 13

when AC reduces with an increase in the quanitity of output

Question 14

what is the rationale of economies of density

Answer 14

subsidise public transport –> due to relationship between optimal pricing and operator financial viability

Question 15

draw the diagram explaining why public transport needs subsidies

Answer 15

socially optimal point for a fare is MC.op

• this is lower than AC.op
• subsidies firms so they can keep running

the 2 indifference curves

Question 16

why is setting fare =AC.oc bad?

Answer 16

e=it would ensure revenue cover costs

-too high and restrict the volume of public transport excessively

Question 17

give the reason for subsidies

Answer 17

Optimal frequency
- increase with q of passengers but less porportionally

MC of serving one customer < AC

Externalities between users

• make user internalize the benefit
• prevent operators going bankrupt

Question 18

The presence of economies of density in public transport services implies subsidies are optimal because

Answer 18

The optimal public transport fare should be smaller than the average operator cost

Question 19

without binding capacity constraints is it necessary to increase frequency?

Answer 19

not strictly

As an additional passenger comes on
- the optimal f(x) will increase

+ve externality
- for users, since waiting time will reduce as a respone to an additional user

Question 20

what are the policy implications of the fare being lower than the AC

Answer 20

positve effect of a additional user on waiting time- set fare below MC of a trip

Question 21

There is an external benefit associated to travel on public transport because

Answer 21

Additional users induce an increase in frequency, which benefits other users as well

Question 22

compare public transportation of techonlogies: light rail , metro and BRT

Answer 22

Real-life example:
• Tirachini et al 2010
• Stylized a monocentric city with radial transport network
• Optimize network density and frequency minimizing total user cost and total OC
Results
• Heavy rail has the highest infrastructure cost and cost of rolling stock
• Light rail is intermediate
• BRT has a smaller OC but capacity of vehicles is small relative to others  implement a higher frequency than the other 2 models