Multimodal Substitutes in Public Transport: Efficient Variety or Wasteful Competition?
27 Pages Posted: 27 Nov 2020
Date Written: October 12, 2020
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: Suggested Citation