FARE SUBSIDIES TO ACHIEVE PARETO OPTIMALITY--A BENEFIT COST APPROACH
Studies on optimal fare subsidy have generally been based on welfare analyses and have not considered deficits explicitly in the objective function. This paper presents a different way of deriving Pareto optimal subsidies in deficit situations. It treats deficits explicitly in the objective function and shows that the resulting subsidy is sufficient to yield Pareto optimal outcome. From the models developed and the numerical example, it has been concluded that the rule is to make the subsidies inversely proportional to transit average cost elasticity. Providing subsidies which depend jointly on fare elasticity and average cost elasticity could yield outcomes which are consistent with federal policies. The analysis further shows that marginal cost pricing defines the efficiency frontier where user benefits equal increased loss to the operator. Furthermore, transit fare subsidy is shown to be efficient so long as it is calculated using the optimal subsidy formula developed in the paper.
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Corporate Authors:
University of British Columbia, Vancouver
Faculty of Commerce
Vancouver, British Columbia Canada -
Authors:
- Obeng, K
- Publication Date: 1983-12
Media Info
- Features: References; Tables;
- Pagination: p. 367-384
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Serial:
- LOGISTICS AND TRANSPORTATION REVIEW
- Volume: 19
- Issue Number: 4
Subject/Index Terms
- TRT Terms: Analysis; Benefit cost analysis; Economic elasticity; Fares; Marginal costs; Marketing; Optimization; Pricing; Subsidies
- Uncontrolled Terms: Pareto optimum
- Old TRIS Terms: Analytical method
- Subject Areas: Economics; Finance; Public Transportation;
Filing Info
- Accession Number: 00386369
- Record Type: Publication
- Files: TRIS
- Created Date: Jun 28 1984 12:00AM