Do New Transit Lines Necessarily Improve User Cost in the Transit System?

Abstract

The paper considers a public transport network without congestion where a fixed number of passengers want to go from A to B, from B to C and from A to C via B. We show under what conditions the addition of a new direct line AC, which avoids the use of the AB and BC links, would increase total user and operator costs. This paradox can be relevant for any network where the additional line AC is operated by an operator other than that of the AB and BC lines. The line (AC) can be either a new air transport link competing with an existing High Speed Rail (HSR) network or an HSR link or direct bus line that bypasses a local train network. Our result raises serious concerns with respect to the decentralized management of transit systems.

Keywords: Transport investment, public transport, externalities

JEL Classification: R42, R48, H42