Public transportation, at its core, is about Definition Of Public Transportation as a shared system. In urban centers across the globe, especially in densely populated metropolitan areas, public transport serves as the essential framework for how people move. We define public transport here as a system of high-capacity vehicles operating on predetermined routes and adhering to set schedules, designed to be shared by the public. Looking ahead, even with rapid technological advancements, the prospect of entirely private mobility for everyone remains impractical. The sheer realities of traffic congestion and the logistical challenges of individual vehicle storage in crowded cities make shared transport systems indispensable. While the technologies powering public transport may evolve, the fundamental need to efficiently coordinate the movement of numerous individuals within shared, high-capacity vehicles will persist. This is where the economics of public transportation becomes crucial, aiming to optimize this coordination, ensure efficient resource allocation, and maximize the societal advantages of mass mobility.
Over the past decades, the field of public transport economics has been significantly shaped by a wealth of research. This article draws upon an extensive review of over 300 studies, encompassing seminal works that have deepened our understanding of the economic principles governing public transportation. Early research in the 1960s and 1970s, predating advanced quantitative methods, laid the groundwork for supply and demand modeling and policy impact simulation in urban networks. Interestingly, many of the fundamental questions and policy recommendations from these early economists remain relevant today. Concepts like economies of scale (density), road pricing strategies, the impact of underpriced car usage, the necessity of socially optimal subsidies, and the complexities of peak load management continue to be central themes in contemporary research.
However, the continued focus on these core subjects doesn’t automatically translate to widespread policy impact. Despite a general consensus within the academic community on issues such as the link between scale economies and subsidies, or the limitations of public transport pricing in alleviating congestion, these understandings are not always apparent within the broader transport industry and among policymakers. One of the ongoing challenges for public transport economics is effective knowledge dissemination and collaboration with related disciplines and professional sectors. To foster future impactful research, a critical review of past and current research efforts is essential.
This article is part of a lineage of reviews in public transport economics. Pioneering works were initially summarized by Nash (1982). Subsequent extensive reviews by Berechman (1993) and Gwilliam (2008) became key resources, particularly regarding the economic and policy aspects of bus and rail deregulation. Jara-Díaz and Gschwender (2003a,b) further contributed with a significant study summarizing welfare-oriented optimization of public transport capacity. Mode-specific reviews focusing on rail and bus transport were also published around the same time by Waters (2007) and Hensher (2007), respectively. The critical issue of pricing within a multimodal transport context, especially considering the substitution between public transport and underpriced car use, has been reviewed by Tirachini and Hensher (2012). Pricing in public transport has also been addressed in reviews by Jara-Díaz and Gschwender (2005) and in a book chapter by Jansson et al. (2015). Complementary reviews from related fields include Desaulniers and Hickman (2007) on optimization problems in public transport with an operations research focus, Guihaire and Hao (2008) on network design and scheduling, and Ibarra-Rojas et al. (2015) on planning and control in bus operations.
This review aims to contribute to the existing literature by providing a comprehensive overview of microeconomic modeling techniques applied in public transport economics. It is intended as a practical guide for researchers, students, and professionals engaged in this field. While it will not delve into textbook-level explanations of each method, it will guide readers to extensive literature for detailed information. This approach also highlights the evolution of methodologies over time. The primary focus is on urban rail and bus systems, but many theoretical insights can be extended to public transport modes in air and water. Furthermore, we will consider emerging transport modes like ride-hailing and car-sharing that share characteristics with traditional public transport.
The scope of this article is deliberately focused on the welfare economics of designing optimal policies for public transport. Therefore, the orientation is primarily theoretical. While relevant empirical findings for model calibration and policy evaluation are mentioned, the statistical methodologies behind these estimations are not the focus. On the demand side, we will discuss methods for modeling consumer behavior in theoretical frameworks and highlight key empirical findings relevant for model calibration. However, the literature on public transport user assignment, such as models of mode and route choice in large networks, is outside the scope. Similarly, the economic evaluation of long-term investments, like infrastructure projects, and cost-benefit analysis (CBA) methodologies are not covered. The central theme is the optimization of supply-side policies, specifically capacity provision and pricing strategies. We will examine the evolution of analytical models for determining optimal frequency, vehicle size, and other supply variables. The role of pricing and its impact on financial sustainability will also be explored. By situating public transport supply within the broader contexts of urban economics, industrial organization, and political economy, we aim to provide a holistic perspective.
The structure of this article is as follows: Section 2 details the various components typically included in a public transport model, such as demand systems, user and operator cost specifications, and the incorporation of spatial and temporal dynamics. This methodological review is complemented by a classification of influential models in the Appendix. Section 3 then explores the application of these analytical models to various policy optimization problems. Recognizing the idealized nature of purely welfare-oriented supply models, Sections 3.1 and 3.7 discuss alternative management objectives and the political economy of public transport, aiming to enhance the realism of policy analysis. Finally, Section 4 examines emerging technologies that interact with and potentially reshape public transport. Section 5 concludes the review.
