Lower bus fares or higher frequencies, what do people want? A microeconomic analysis

Abstract

In the literature, different studies support the implementation of subsidies to ensure a proper operation of the public bus transport systems. However, in the actual state of the practice most of public transportation systems are designed under the scheme of financial selfsustainability. In addition, it is not clearly defined under what conditions these subsidies should be used either to increase the level of service or to reduce bus fares. This paper addresses this issue by developing a mathematical formulation to determine how the government can allocate a fix amount of subsidy (by subsidising the fare or the operation by improving the bus frequencies) in order to increase the modal share in the bus public transport system.