Public Transit Bus Procurement: the Role of Energy Prices, Regulation and Federal Subsidies

49 Pages Posted: 10 Mar 2014 Last revised: 14 Mar 2014

See all articles by Shanjun Li

Shanjun Li

Cornell University - School of Applied Economics and Management

Matthew E. Kahn

University of Southern California; National Bureau of Economic Research (NBER)

Jerry Nickelsburg

University of California, Los Angeles (UCLA) - Anderson Forecast

Multiple version iconThere are 2 versions of this paper

Date Written: March 2014

Abstract

The U.S. public transit system represents a multi-billion dollar industry that provides essential transit services to millions of urban residents. We study the market for new transit buses that features a set of non-profit transit agencies purchasing buses primarily from a few domestic bus makers. Unlike private vehicles, the fuel economy of public buses is irresponsive to fuel price changes. To understand this finding, we build a model of bus fleet management decisions of local transit agencies that yields testable hypotheses. Our empirical analysis of bus fleet turnover and capital investment suggests that transit agencies: (1) do not respond to energy prices in either their scrappage or purchase decisions; (2) respond to environmental regulations by scrapping diesel buses earlier and switch to natural gas buses; (3) prefer purchasing buses from manufacturers whose assembly plants are located in the same state; (4) exhibit significant brand loyalty or lock-in effects; (5) favor domestically produced buses when they have access to more federal funding.

Suggested Citation

Li, Shanjun and Kahn, Matthew E. and Nickelsburg, Jerry, Public Transit Bus Procurement: the Role of Energy Prices, Regulation and Federal Subsidies (March 2014). NBER Working Paper No. w19964. Available at SSRN: https://ssrn.com/abstract=2406806

Shanjun Li (Contact Author)

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

Matthew E. Kahn

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jerry Nickelsburg

University of California, Los Angeles (UCLA) - Anderson Forecast ( email )

110 Westwood Plaza, Suite C525
Los Angeles, CA 90095-1481
United States

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