This paper tests the elasticities to time, frequency and interchange implied by an approach which combines these three variables into a single term and compares this approach with models which estimate separate elasticities. The forecasts obtained from different model forms can be appreciably different.
Topic: 17. Service Quality
High concentration in the less-than-truckload motor carrier industry is examined from the perspective of the differentiated product theory. Under the condition that cost increases of high service quality are within the limits that shippers are willing to pay, only a small number of competing carriers can co-exist.
The paper examines the impact of deregulation on service co-ordination in the British conurbations outside London. Co-ordination decreased significantly in respect of timetables, fares and passenger information in particular in the period immediately following deregulation. Since then some aspects of co-ordination have improved. On balance, the author’s judgement is that there has been a net decrease in consumer welfare.
Lower prices encourage firms to economise by increasing load factors; on the other hand, lower prices require higher service frequency to accommodate the additional passengers. Thus inverse price/quality tradeoffs are possible in public transport, and did occur when the US airline industry was deregulated.
The authors find that a competitive equilibrium will have only two firms, providing that services of different quality are at different fares. They consider factors influencing consumers’ welfare under competition and where there is a public monopolist. Where there is already competition between buses and taxis, there may be no scope for minibuses as a third competitor.
Optimal air fares and frequency may bring profits, but normally a subsidy will be needed. It is also possible for competition to provide the optimal number of flights.
One-man operation of urban buses has reduced demand and resulted in a net loss in welfare.
The model shows that quality of service variable (frequency and load factors) are important influences on airline demand. Further research is suggested.
If total social costs are to be minimised, bus frequencies should be higher than present, especially in off-peak, and buses should be smaller.
Commercial operation of a monopoly public transport service would lead to discrimination against some passengers. Pareto-type social welfare is a complex aim. London transport seeks to maximise passenger mileage subject to a budget constraint.