Marginal Cost Pricing and Subsidy of Small Urban Transit

This study analyzes economies of scale and density as a rationale for subsidizing transit agencies in small urban areas. A long-run cost model is estimated with data from 2006 to 2009 for 168 transit agencies that directly operated fixed-route bus service in small urban areas. With vehicle revenue miles used as transit output, results show that small urban transit agencies experience economies of scale and density. A full-cost model is estimated; the model includes the addition of external costs and benefits. External benefits result from the reduced waiting times that follow an increase in service frequency. Results are used to estimate the optimal fare, which is equal to marginal social cost of service. The needed subsidy is calculated as the difference between the revenue generated by the optimal fare and that needed to maintain efficient levels of production. The rationale for subsidies is an important issue, as many agencies have experienced recent reductions in operational funding.

• Record URL:
  • https://doi.org/10.3141/2274-08
• Summary URL:
  • http://scholar.google.com/scholar_lookup?title=Marginal+Cost+Pricing+and+Subsidy+of+Small+Urban+Transit&author=J.+Mattson&author=D.+Ripplinger&publication_year=2012
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/isbn/9780309223171
• Authors:
  • Mattson, Jeremy
  • Ripplinger, David
• Publication Date: 2012

Language

• English

Media Info

• Media Type: Print
• Features: References; Tables;
• Pagination: pp 77–83
• Monograph Title: Transit 2012, Volume 1, Including 2012 Thomas B. Deen Distinguished Lecture
• Serial:
  • Transportation Research Record: Journal of the Transportation Research Board
  • Issue Number: 2274
  • Publisher: Transportation Research Board
  • ISSN: 0361-1981

Subject/Index Terms

• TRT Terms: Bus transit; Fares; Financing; Marginal costs; Public transit; Small cities; Subsidies; Urban transit
• Subject Areas: Finance; Passenger Transportation; Public Transportation; I10: Economics and Administration;

Filing Info

• Accession Number: 01373445
• Record Type: Publication
• ISBN: 9780309223171
• Report/Paper Numbers: 12-0954
• Files: TRIS, TRB, ATRI
• Created Date: Jun 22 2012 1:13PM