Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services

We formulate and estimate a structural model for travel demand, in which users have hetero- geneous preferences and make their transport decisions considering the network congestion. A key component in the model is that users have incomplete information about the preferences of other users in the network and they behave strategically when they make transportation decisions (mode and number of trips). Therefore, the congestion level is endogenously determinate in the equilibrium of the game played by users. For the estimation, we use the first order conditions of the users' utility maximization problem to derive the likelihood function and apply Bayesian methods for inference. Using data from Santiago, Chile, the estimated demand elasticities are consistent with results reported in the literature and the parameters confirm the effect of the congestion on the individuals' preferences. Finally, we compute optimal nonlinear prices for buses in Santiago, Chile. As a result, the nonlinear pricing schedule produces total benefits slightly greater than the linear pricing. Also, nonlinear pricing implies fewer individuals making trips by bus, but a higher number of trips per individual.

Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services

We formulate and estimate a structural model for travel demand, in which users have hetero- geneous preferences and make their transport decisions considering the network congestion. A key component in the model is that users have incomplete information about the preferences of other users in the network and they behave strategically when they make transportation decisions (mode and number of trips). Therefore, the congestion level is endogenously determinate in the equilibrium of the game played by users. For the estimation, we use the first order conditions of the users' utility maximization problem to derive the likelihood function and apply Bayesian methods for inference. Using data from Santiago, Chile, the estimated demand elasticities are consistent with results reported in the literature and the parameters confirm the effect of the congestion on the individuals' preferences. Finally, we compute optimal nonlinear prices for buses in Santiago, Chile. As a result, the nonlinear pricing schedule produces total benefits slightly greater than the linear pricing. Also, nonlinear pricing implies fewer individuals making trips by bus, but a higher number of trips per individual

Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services

We formulate and estimate a structural model for travel demand, in which users have hetero- geneous preferences and make their transport decisions considering the network congestion. A key component in the model is that users have incomplete information about the preferences of other users in the network and they behave strategically when they make transportation decisions (mode and number of trips). Therefore, the congestion level is endogenously determinate in the equilibrium of the game played by users. For the estimation, we use the first order conditions of the users' utility maximization problem to derive the likelihood function and apply Bayesian methods for inference. Using data from Santiago, Chile, the estimated demand elasticities are consistent with results reported in the literature and the parameters confirm the effect of the congestion on the individuals' preferences. Finally, we compute optimal nonlinear prices for buses in Santiago, Chile. As a result, the nonlinear pricing schedule produces total benefits slightly greater than the linear pricing. Also, nonlinear pricing implies fewer individuals making trips by bus, but a higher number of trips per individual

Efectos de las Emisión de Bonos del Banco Central Sobre las Tasas de Interés

Este artículo investiga, a través de un análisis econométrico, si la política de emisión de bonos del Banco Central de Chile produce algún efecto sobre las tasas de interés reales de mercado. La hipótesis de trabajo es que dicho efecto puede ser producido tanto por la emisión en sí como por cambios no anticipados en dichas emisiones. Se supone que las tasas siguen un proceso autorregresivo, donde los cambios y eventos en el mercado de bonos afectarían su trayectoria. Con el objetivo de captar esta dinámica, estimamos un modelo VAR con variables exógenas que representan los diversos eventos y los excesos de demanda en las licitaciones. Los resultados indican que un cambio sorpresivo en la política financiera, medido como la variación del cupo mensual anunciado, tiene efectos significativos y persistentes, especialmente en la tasa de interés a 10 años. Asimismo, la relación entre la demanda y la oferta de bonos, medida como la razón entre el monto adjudicado y la demanda en cada licitación, tiene un efecto significativo. Un análisis sobre la estabilidad de los parámetros revela que ciertos eventos de la crisis financiera del año 2008 generaron inestabilidad. En particular, en el caso de la tasa a 10 años plazo, los cambios no anticipados en los cupos pasan de no ser significativos en el periodo anterior a abril del 2008, a serlo a partir de septiembre del mismo año

Estimation of urban bus transit marginal cost without cost data

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

Cost and fare estimation for the urban bus transit system of Santiago

In this paper, we estimate the cost function of bus operators of Transantiago and the Budget balance fare to contribute technically to the discussion on the level of subsidies needed for transit system of Santiago. We estimate the cost function and an aggregate demand model. Our results show that there are economies of density and the budget-balance fare (type Ramsey price) is higher than the actual bus fare, suggesting that subsidies are justified. Nevertheless, we estimate that for the current (December 2011) fare the subsidy should be 40% lower than the one determined by the Government. On the other hand, we estimate that for such level of subsidy the optimal fare should be only 50% of the current fare.  

Cost and fare estimation for the bus transit system of Santiago

This paper studies the costs of the transit system of Santiago, Chile, and proposes pricing schedules to finance it considering a fixed amount of subsidy. We estimate a cost function for the firms providing bus services in Santiago and study their industrial structure. We also estimate a demand model using aggregate data, which delivers information on the demand price elasticity and the effect of other variables related to the supply (e.g., capacity and frequency). Finally, we compute four pricing schedules: uniform price with and without subsidy and two-part tariffs with and without subsidy. Our results show that: (i) the industry exhibits economies of scale when considering both demand-oriented and supply-oriented output measures; (ii) measures of technical efficiency are consistent with the observed exit of firms from the market; (iii) the budget-balanced fare without subsidy is higher than the actual fare, suggesting that subsidies are justified; (iv) the budget-balanced fare with subsidy is higher than the actual fare, suggesting that subsidies are insufficient; (v) two-part tariffs either with or without subsidy are the most effective means of increasing bus travel demand and user welfare; and (vi) a menu of tickets with two options (a uniform price and a two-part tariff) is a Pareto-improving pricing schedule that balances the budget and increases bus travel demand

Misguided quality incentives: The case of the Santiago bus system

This article helps explain why incentive-based contracts have failed in some cities. It also explicitly shows how contracted kilometer- and passenger-based payments affect transit service quality. First, we study how contract renegotiations in 2012 and 2013 affected quality related to service kilometers in the bus public transport system of Santiago, Chile. To do that, we analyze the evolution of compliance measures and estimate the effect of renegotiations on key performance indicators. The main results are that the renegotiation of 2012 led to minor improvements in frequency compliance but deterioration in regularity, whereas the renegotiation of 2013 led to reduced fines for non-compliance with no change in frequency compliance and decreased regularity. Second, we formulate a model to analyze the behavior of a firm operating under a contract like the one in Santiago. We identify conditions that must be present for an operator to provide the contracted service kilometers, depending on the per-kilometer and per-passenger payments stipulated in the contract. The results of the analysis are empirically tested, and we conclude that the incentives in Santiago do not sufficiently incentivize contract compliance. A central result is a formula for payment per kilometer and payment per passenger when the objective is the provision of service kilometers

Urban travel demand model with endogenous congestion

We formulate and estimate a structural model for travel demand in which users have heterogeneous preferences and make their transport decisions based on network congestion. A key component in the model is the infinite number of users in the network, all of whom have common knowledge about the distribution of preferences in the population. In this setting, the congestion level is endogenously determined in the equilibrium of a game with a continuum of players. For the estimate, we use the first-order conditions of the users’ utility maximization problem to derive the likelihood function. For inference, we apply a two-step, semi-parametric method. Using data from Santiago, Chile, we show that the estimated parameters confirm the effect of congestion on individuals’ preferences and that demand elasticities obtained by using our framework are consistent with results reported in the literature. We use the model to evaluate the effect on the welfare of increasing the cost of car trips and implementing a second-best fare schedule for bus transit. We also assess the welfare loss caused by congestion in Santiago