Patronage Incentives in Urban Public Transport Contracts -- Appraisal of Practice and Experience to Date

This chapter describes how, in a fully deregulated and commercial public transport market, competing operators are entirely dependent on revenue (fares) from consumers for their services. Each operator will adjust its overall product (service levels, service quality, price etc) in order to maximize its profit, i.e., at the margin its marginal revenue equities to its marginal costs (including a normal profit margin). The operator will take full responsibility for both production risk (cost of services) and market risk (patronage and hence revenue from services). In most developed cities, the public transport market is regulated and subsidized (recognizing the externality benefits and user economies of scale associated with good levels and quality of service). In these circumstances, the government authority will typically specify minimum service levels, maximum fares, vehicle standards etc., and will subsidize selected operators to provide the required services. A key issue then arising is how payments to the operator should be structure, and in particular, to what extent the operator should bear the production risk and/or market risk. This paper addresses the range of payment models, which all involve some degree of patronage-related payments and hence revenue risk to operators.


  • English

Media Info

  • Media Type: Print
  • Features: Appendices; Figures; References; Tables;
  • Pagination: pp 103-128
  • Monograph Title: Competition and Ownership in Land Passenger Transport

Subject/Index Terms

Filing Info

  • Accession Number: 01003333
  • Record Type: Publication
  • ISBN: 0080445802
  • Files: TRIS
  • Created Date: Aug 25 2005 11:04AM