Estimation of urban bus transit marginal cost without cost data
mode - bus, place - south america, operations - capacity, operations - frequency, ridership - demand, ridership - modelling, economics - profitability, economics - economies of scale, planning - network design
Cost estimation, Bus transit, Marginal cost
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.
Permission to publish the abstract has been given by Elsevier, copyright remains with them.
Batarce, M. (2016). Estimation of urban bus transit marginal cost without cost data. Transportation Research Part B: Methodological, Vol. 90, pp. 241–262.