Highlights This research develops a method to estimate the marginal cost of bus transit services without using cost data. The only required data are demand for bus trips, usually collected for transport planning, and bus network configuration. The method is applied to estimate marginal cost of bus transit system in Santiago, Chile. Results indicate bus transit industry in Santiago exhibits increasing returns to scale and economies of network extension.

    Abstract We develop a method to study the industrial structure of urban bus transit without using cost data. To do so, we estimate the marginal cost function under the assumption that firms compete on frequency and adjust frequency to maximize profits. Our methodology is applied to Santiago, Chile. In this case, demand is modeled with a simplified model of transit network assignment. The goal is to consider how frequency, capacity, and on-board passengers affect the bus line’s demand. The marginal cost function is estimated by using the first-order conditions of the firm’s profit maximization problem, using the results of the demand model as data. We conclude that the urban bus transit industry in Santiago exhibits increasing returns to scale for low levels of demand and that these returns are exhausted rapidly at a moderate demand level. Additionally, firms exhibit economies of network expansion, on average.


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    Title :

    Estimation of urban bus transit marginal cost without cost data


    Contributors:


    Publication date :

    2016-05-09


    Size :

    22 pages




    Type of media :

    Article (Journal)


    Type of material :

    Electronic Resource


    Language :

    English





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