Multimodal Substitutes in Public Transport: Efficient Variety or Wasteful Competition?

27 Pages Posted: 27 Nov 2020

See all articles by Daniel Hörcher

Daniel Hörcher

Imperial College London; Budapest University of Technology and Economics

Daniel J. Graham

Imperial College London - Department of Civil and Environmental Engineering

Date Written: October 12, 2020

Abstract

The question we raise is whether it is desirable under public ownership to run multiple public transport services, e.g. buses and trains, along a transport corridor, when these modes are (imperfect) substitutes. The paper applies the theory of product differentiation in the context of social welfare oriented public transport provision. We react to ongoing policy debates by showing that modal variety may well be beneficial for society, if the spread of consumer preferences is sufficiently wide and the magnitude of scale economies in service provision is limited. This point is supported by theory and illustrated with an agent-based simulation model.

Keywords: public transport, product differentiation, pricing, capacity optimisation

JEL Classification: R48, D45, D61, D62

Suggested Citation

Hörcher, Daniel and Graham, Daniel J., Multimodal Substitutes in Public Transport: Efficient Variety or Wasteful Competition? (October 12, 2020). Available at SSRN: https://ssrn.com/abstract=3710019 or http://dx.doi.org/10.2139/ssrn.3710019

Daniel Hörcher (Contact Author)

Imperial College London ( email )

Exhibition Road
London SW7 2AZ
United Kingdom

Budapest University of Technology and Economics ( email )

Budafoki ut 8.
Budapest, 1111
Hungary

Daniel J. Graham

Imperial College London - Department of Civil and Environmental Engineering ( email )

Exhibition Road
London SW7 2AZ
United Kingdom

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