Annals of Public and Cooperative Economics 76:2 2005

pp. 257274

WELFARE EFFECTS OF PRICE INTEGRATION IN LOCAL PUBLIC TRANSPORT

by

Alberto CASSONE
and

Carla MARCHESE*
Department of Public Policy and Public Choice POLIS, University of Eastern Piedmont Amedeo Avogadro Alessandria, Italy
Received May 2004; final revision accepted January 2005

ABSTRACT**: In metropolitan areas collective transport is often supplied by many firms and in many modes. The paper focusses on the merging of decisions about prices in two market regimes: monopoly and benevolent regulation through Ramsey pricing. The results confirm that centralization entails efficiency gains under monopoly whenever a unique supplier substitutes many firms serving each link of a network. Under benevolent regulation, instead, centralization entails efficiency gains only under certain conditions. Moreover, efficiency improvements under Ramsey pricing involve the introduction of cross subsidies among previous regulatory jurisdictions. Hence some users gain while others lose. Both the theoretical and empirical literature suggest that periphery residents are the main beneficiaries of centralization.

* Financial support by MIUR (grant No. 2003131910-002, year 2003) is gratefully acknowledged. We wish also to thank two anonymous referees of this review; the usual disclaimer applies. Corresponding author: E-mail: carla.marchese@sp.unipmn.it. ** Resume en fin darticle; Zusammenfassung am Ende des Artikels; resumen al fin del artculo.
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Introduction

Local public transport in European metropolitan regions, which usually involves many suppliers and many modes (e.g. train, bus, tram, etc.), can improve its performance by resorting to integrated ticketing. The underlying principle of this policy is to supply the customer with a complete service, from origin to destination, that may combine several transport modes. Within an integrated local transport system, various degrees of flexibility are usually available to the customer in terms of choosing the itinerary, while prices are based on a number of criteria, such as length of validity of the document purchased, the number of zones crossed, the length of the trip, the social characteristics of the traveller, and so forth. Integration may involve private and public firms, as well as local public authorities. An early example of transport integration dating back to 1967 is offered by the area of Hamburg. Price integration has been available in London through Travelcards and Travelpasses since 1983. The Metropolitan Transport Authority of Barcelona is one of the recently developed bodies aimed at securing transport and price integration. In Italy there are many examples of price integration in local public transport, involving the areas of Turin, Milan, Rome, Naples and others, that are currently expanding their area of coverage. While empirical evidence of the effects of this policy is not easy to gather and critically evaluate, it seems as though price integration positively affects the quality and the patronage of public transport. Crampton (2002), in a study of the factors that explain a high rank in terms of performance of urban rail systems in 24 cities from 7 countries, finds that the percentage of usage of travelcards positively affects the ranking. Gilbert and Jalilian (1991) find that a large share (up to two thirds) of the increase in travel in the London public transport system since 1983 is due to the introduction of travelcards. Positive effects upon demand have also been pointed out by FitzRoy and Smith (1999) with reference to several cities in Switzerland. Frequently, however, the increase in demand is not accompanied by improvements in the financial performance of local public transport (see e.g. Pucher and Kurth, 1996 and Matas, 2003). The aim of this paper is to evaluate, mainly by collecting and organizing theoretical results already available in the literature, the implications of price integration with reference to two issues, namely: (a) the potential efficiency gain it involves and (b) the distributive consequences for the citizens involved. We focus upon bare price
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integration, leaving aside all the effects stemming from the general redesign of the supply of public transport that usually goes along with the integration of fares. Integration is modelled as the centralization of decisions about prices. Two benchmark cases are considered: private simple monopoly and Ramsey pricing. The former provides a useful starting point as it has been widely analyzed in the literature (see e.g. Brueckner 2003 and Roson and van den Bergh 2000). Ramsey pricing, on the other hand, can be considered as representative of benevolent public regulation, or of the results that would be attained in a perfectly contestable market, thus providing a suitable second-best benchmark against which to evaluate the empirical evidence. While other pricing rules that a benevolent regulator might apply could also be considered, it is well established that the Ramsey approach provides a very general framework within which to rationalize many forms of price discrimination,1 and hence it is useful for depicting the basic problems that arise in local public transport, in which fares often assume a very complicated and highly differentiated structure.2 Between the two extreme cases considered in this paper (monopoly and benevolent regulation) there is a large field represented by regulation under asymmetric information, pressure from interest groups, capture opportunities etc. We do not address these cases, which are debated in a large stream of literature at the frontier of economic research (see e.g. Laffont and Pouyet 2003). The paper is organized as follows. In Section 2, after a short description of the general problems involved by integration, the efficiency implications of integrating pricing decisions of private monopolists or of benevolent public regulators are analyzed. Section 3 considers the distributional implications of tariff integration. Concluding remarks follow in Section 4.

The potential efficiency improvement

Some benefits of price integration stem from the reduction of transaction costs for passengers. Rather than contracting with many
1 See e.g. Borrmann (2003). 2 Pucher and Kurth (1996) report that Munich offered 24 types of tickets, varying by age group, type of education and training, degree of handicap and time of day. A visit to the web sites of local transport authorities of European capitals confirms that a large variety of documents and tariffs is offered nowadays.
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suppliers, the passenger needs only to buy one document in an integrated transport system. Interchanges become easier to exploit and boarding times are reduced, as some controls can be dispensed with for passengers who have validated their document beforehand. Even if these savings must be balanced against the coordination costs borne by the suppliers, who must often modify their technology in order to enter an integrated price system, it seems likely that some net benefit could arise. In fact the fixed costs required for the start-up of the system can be recovered over time, and are of less concern the larger is the growth in demand stemming from the policy. Price integration tends to reduce the quality gap between public and private (automobile) transport, by increasing the flexibility of the former in meeting customer demand, and is thus credited with broadening the patronage of public transport. Technology has a very important role in dictating the degree of integration among suppliers needed to secure the aforementioned benefits. The travel documents most widely used today in integrated systems do not allow for exact measurement of the consumption made by passengers with reference to the facilities of a given supplier. Hence there must either be a single authority which purchases the service from the producers and collects the whole revenue, or procedures for sharing the revenue among the producers must be developed. Already available but somewhat costly and not yet widespread alternative technologies, based e.g. on contactless cards, would instead allow exact measurement of consumption and the possibility of easily charging specific fares for each service used. In this case, coordination among suppliers would merely require the adoption of standards specifying document characteristics and conformation of the validation and control devices. Marketing considerations, however, might still encourage greater cooperation in order to offer the customer simple and well designed price schedules for the system as a whole. Price integration can also be part of a more general integration process. This might involve the introduction of a kind of hub-andspoke model, in which passengers travelling long distances pass through transshipment points, while the number of links operated is reduced by cancelling some direct connections. The benefits arising are mainly a reduction in fixed costs, while, on the other hand, the quality of the service is likely to decline (as the number of interchanges increases), with negative effects upon the passengers willingness to pay. A large body of literature has discussed the conditions under which the transition from a fully connected network to a
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hub-and spoke one is likely to arise, under monopoly or imperfect competition.3 Let us now focus upon bare price integration, by which we mean that the choice about prices is made by just one subject instead of by many, disregarding other facets of the integration process (reduction of transaction costs, fixed costs, etc.). Integration is thus modelled as the centralization of price decisions.4 The benefits of centralizing price decisions under monopoly have been examined by many papers focusing on air transport. Brueckner (2003) shows that when two monopolistic operators supplying two components of a joint trip cooperate as a single monopolist, the global fare is lower than in the case of non-cooperation. The single supplier takes into account the fact that raising the price on one link has negative effects upon the demand for the whole network and thus internalizes the externality. Roson and van den Bergh (2000), show that if the single monopolistic owner of the two links can price discriminate, travellers are exploited for short distances and favoured over long distances. Welfare is reduced with reference to an integrated non discriminating monopoly, but may still be higher than in the case of no integration. Whenever substitution or complementarity relationships exist, a monopolist supplying many services (whether with price discrimination or not) has higher profits than separate monopolists supplying single products. Hence, whenever the opening of a new link connected to a network is worthwhile, it should be done by an existing monopolistic firm. Transaction costs or legal provisions, however, might explain why one can find many transport suppliers in non-competitive markets. While the literature has focussed mainly upon monopolistic supply, extension of the results to firms that resort to Ramsey prices seems straightforward, as Ramsey prices can be conceived of as monopolistic prices which are set by an agent that systematically considers inflated values of the elasticity of demand and is thus keen to apply lower prices than those found under monopoly, as long as this is compatible with budget balance or with some net revenue target. One crucial factor in identifying equilibrium prices, however, is represented by the interactions among suppliers under monopoly or under Ramsey prices.

3 See e.g. Pels et al. (2000). 4 The choice of the regulatory mode (either decentralized or centralized) is modelled as exogenous in this paper. For the endogenization of this institutional choice, see Bassanini and Pouyet (2004).
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2.1

Integrating private monopolists

To study the effects of merging price decisions, we consider a basic transport network comprising three equally spaced points (a, b, c) connected by two links, 1 and 2, as in Figure 1. There is a representative consumer, whose utility depends on a numeraire good and on transport services, with a quasi-linear utility function to be maximized under the budget constraint. Her inverse demands for transportation on each link5 are equal and are given by pi (qi, qj), with i 1, 2, j 6 i and @pii < 0, @pji > 0. This pattern might arise @q @q if the two links are seen as complements in order to provide the option of travelling from a to c through b and vice versa. Note also that, to keep things simple, we have assumed that there are no income effects, and thus market demands also represent compensated demands. Let us assume that costs6 are symmetrical for each of the two links and are given by: Cqi F cqi Each link is operated by a (simple) monopolist, who sees the quantity supplied by the other monopolist as given, in Nash fashion. In equilibrium, the standard condition of equating marginal revenue to marginal cost must hold for each link, that is:
b

link 1

link 2

Figure 1 A two-link network

5 Quantity is the number of round trips on the link. 6 We are considering a case in which marginal costs are constant, while fixed costs are specific to each link and cannot be reduced by merging the two firms. Hence, from the point of view of cost efficiency, there are no benefits from the integration of firms. On the other hand, average costs are decreasing in output for each firm.
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pi

@pi qi ; qj qi c @qi

For a unified monopolist serving both markets, the corresponding condition for each service becomes:
pi @pi qi ; qj @pj qi ; qj qi qj c @qi @qi
@p q ; q

i As (2) also comprises the positive term j @qi j qj , it solves for a larger qi than (1), and hence the price must be lower than in the case without integration. The explanation for better performance in efficiency terms of the monopolist serving both markets is straightforward: the monopolist takes into account the externalities that prices for one link have on the traffic of the other. By contrast, monopolists serving only one link have variables q1 or q2 respectively as the only instrument for their maximization problem, oblivious of cross effects.

2.2

Integrating benevolent regulators: the symmetrical case

Let us consider the interaction between two regulators, one for each link, whose only aim is to maximize the utility of a representative consumer demanding both services.7 Each regulator can choose only the price of the link under her control, with the constraint of balancing the budget. Average cost pricing is the choice that ensues, which implies that: pi qi ; qj qi F cqi 3

where qj is the quantity chosen by the other regulator, which is taken as given in Nash fashion. We are now ready to discuss what happens in Nash equilibrium.
7 Bassanini and Pouyet (2004), with reference to a composite commodity (international transport), assume instead that each regulator aims at maximizing the national share only of the consumer surplus. The results of this scenario underline the seriously negative implications of non-cooperative price regulation. While this approach could also be adopted with reference to local public transport, our aim is to construct a basic benchmark case of non-cooperation in which benevolence is pervasive.
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Let us restate the assumptions: A. 1 services to be integrated are characterized by symmetrical demand and cost functions; A. 2 fixed costs are specific to each service. Proposition 1 A centralized regulator who resorts to Ramsey pricing with the constraint of balancing the budget sets the same prices that are applied by decentralized regulators that resort to average cost pricing. Proof. As decentralized regulators are symmetrical, their interaction leads in Nash equilibrium to q1 q2 Q, where Q is the networks 2 total output, while p1 p2 p. Thus the following equality holds for the whole network: pQ 2F cQ: 4

Turning to the case of a unique benevolent regulator that sets prices for both links and must balance the whole budget, the Ramsey approach implies that the following condition8 must hold: p1 MC1 p2 MC2 MC1 MR1 MC2 MR2 5

As demands and marginal costs are symmetrical, it turns out that the same price must be applied to satisfy (5), and hence q1 q2 Q must hold, while p1 p2 p. The regulators problem 2 thus involves solving the budget constraint (4) for p, with the same result as under decentralization. Hence nothing changes with respect to the case in which there are two benevolent regulators: prices and quantities are the same. The intuitive reasoning behind this result is as follows. As Ramsey prices are the same for both services, what in fact is needed is to set prices that balance the budget for q1 q2; but the budget for the unique regulator simply doubles the budget for a single link. This result clearly holds whenever integration consists of an n-times replication of one component, and carries over to demands characterized by substitutability relationships. In the latter case, however, one must

8 This is another version of the more widely used condition that links mark-ups to elasticities: see e.g. Brown and Sibley (1986).
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also consider the possibility that a benevolent regulator suppresses some of the services in order to obtain an efficiency improvement.9 However, as we focus upon bare price integration, disregarding interventions that go beyond price decisions, we will ignore this possibility in the following. Proposition 1 then implies that under the stated assumptions interaction among benevolent regulators, when there are many, is enough to lead, in Nash equilibrium, to a proper account of reciprocal externalities, thus giving rise to the same results as in cases where there is just one regulator. With reference to the possibility of reaching the Nash equilibrium under decentralization, e.g. when a complementarity relationship exists, consider that each regulator should be willing to operate the service at least at an average price calculated for her link oblivious of the positive externality from the other service. But if both regulators start by following this rule then each service in fact makes profits. The regulators should thus be willing to cut prices, until the equilibrium level is eventually reached. A numerical example with linear demands is provided in Table 1. In the example, the inverse demand for each link is given by: 100 qi 0:5qj while the cost function is: 2000 2qi 2.3 Integrating benevolent regulators: the asymmetrical case

Is integration under Ramsey pricing still neutral when demands or costs differ from link to link? To begin answering this question let us return to the two-link example with linear demands and costs, but
Table 1 A comparison between equilibrium prices and quantities in non integrated or integrated monopoly and regulation
Regime Two monopolists One monopolist Two regulators One regulator qi 65.33 98.00 172.86 172.86 pi 67.33 51.00 13.57 13.57  2268.44 5604.00 0 0

See Braeutigam (1984).

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with parameter values differing between link 1 and 2. The reaction function of each regulator is alike (3), while in equilibrium each regulator must balance her budget given the others regulators response. Thus, in equilibrium, the following system which implicitly defines the reaction functions is satisfied:
p1 q* ; q* q* cq* F1 0 1 2 1 1 * * * p2 q1 ; q2 q2 cq* F2 0 2 6

An interesting case occurs if we assume that F1 and F2 are equal to the gross profit that would be raised in each link by a monopolist supplying both services and maximizing the overall profit. In this case, the monopoly prices would also solve system (6); hence we once again have a case in which integration is neutral, i.e. the same choice would be made both by decentralized regulators and by a centralized regulator with a fixed cost F F1 F2. Given the existence and uniqueness of the monopoly solution, the neutrality prediction can easily be extended to many regulators, each of which supplies many 0 0 services. Let us now consider lower fixed costs, F1 < F1 and F2 < F2 . In this case, neutrality of price integration needs not hold anymore. A central regulator might make a different choice from the equilibrium one under decentralization, because, besides seeking prices that balance the budget, she is also concerned with finding the correct condition for determining relative mark-ups according to the Ramsey approach [see (5)]. This condition is instead disregarded under decentralization for the services not belonging to the jurisdiction; it may thus might be violated, implying lower consumer surplus than under integration. Cases of differing demands or costs are far more common than those considered in Proposition 1. This seems to suggest that centralization can lead to results resembling those reached under simple monopoly, where all prices are cut under integration. Yet important differences remain, as will become clear in Proposition 2. Let us first introduce the following definition (see Braeutigam 1989, p. 1297): Definition 1 (undominated price vector) Let p ( p1, p2, . . . pn) and b p ( b1 , b2 ; , bn ) be vectors yielding zero profits for a monopolist. The p p p b vector p is undominated if there exists no p p with pi bi 8i, and p pi < bi for at least one i. p This property is necessary for sustainability in contestable markets. Here instead we will stress the welfare implications arising when there is a shift from one undominated price vector to another.
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We need a further assumption: b A. 3 Let us call p the vector of Ramsey prices balancing the budget of each regulator under decentralization, p the vector of Ramsey prices under centralization, and pmon the vector of (simple) monopoly prices under centralization. It is assumed that all these vectors exist and that b p pmon . Since we are studying the effects of policies providing for integration of services previously regulated on a local basis, assuming the existence of both local and central solutions seems natural. The b assumption that p pmon implies that all decentralized regulators can balance their budget at least when they set the prices that would arise under a centralized monopoly solution, which offers the largest potential overall profits. Proposition 2 Under Assumption A2 and A3 and if no service is b suppressed under centralization: a) p does not dominate p; either b or there are cross subsidies among jurisdictions under pp centralization. Proof. Assumption A2 and the exclusion of the cases in which services are suppressed imply that the centralized regulator faces costs that are the sum of costs of decentralized regulators, i.e. there is additivity of costs. This rules out the possibility of cutting all prices through global cost-cutting. Let us consider the zero profit locus ( pi, pj) 0 for every couple of prices under centralization. The local equilibrium must lie on this locus, as ( pi, pj) 0 when all local budgets balance, given that the central regulator cannot produce the same quantities at lower costs. The portion of the locus with coordinates that satisfy (pi pmon , pj pmon ) is undominated and has a negative slope. Since i j b p pmon , prices applied under decentralization lie on the aforementioned portion of the zero profit contour. This also holds true for Ramsey prices under centralization; hence the latter do not domib nate the former, as stated in part a). Moreover, either p p, or, b b whenever p p, relative prices differ in the two cases. If p p, the sub-budgets of each decentralized regulator evaluated at prices p cannot be all in surplus or all in deficit, as this would imply a budget imbalance even at the central level. Neither can they all be all b balanced, as this would imply p p, provided that p is at least b b weakly Pareto superior to p. Thus, when p p, some sub-budgets are in deficit and others are in surplus, and there are cross-subsidies among jurisdictions.
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60 50 40 p 30 20

R 1

=0

E 10 R1 0 10 20 R2 30 r 40 50 E R 2 60

Figure 2 Equilibrium under decentralization and centralization

Equilibrium under decentralization for two complementary services is represented by point E in Figure 2. Point E belongs to the zero profit locus  0 for the whole system as well as to the zero profit loci R1 R01 and R2 R02 for the two local regulators; E represents an undominated price vector; Ramsey prices are at E0 . Centralized Ramsey pricing therefore improves efficiency whenever a relative price change is needed with respect to the average cost pricing of each separate service or in general with respect to Ramsey pricing of groups of services. The benefits of integration depend on the introduction of cross-subsidies. Centralization secures efficiency gains because the revenue requirements can be reallocated among services, in order to reduce excess burden, but no generalized reduction of prices occurs. While centralization can entail efficiency gains, its redistributive implications are nonetheless problematic. Our model is based on a representative consumer demanding all services, such that all distributive considerations are disregarded. In practice, demand for each service is often made by specific social groups, and when tariff integration modifies relative prices, a distributive conflict might arise. Note that while we assumed that regulators are required to balance the budget, Proposition 2 clearly carries over to cases in which deficits are allowed for, provided that the deficit amount
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permissible at the central level is the sum of those allowed for at the local level. If deficits are financed through subsidies by the public budgets, one must take into account the cost of public funds,10 i.e. the burden of raising public revenue through distortionary taxation or other sources. A benevolent centralized regulator can modify prices and reallocate deficits in order to reduce the overall excess burden. Hence, if each jurisdiction cares about the level of its contribution, once again distributive problems arise.

Distributional considerations

Let us now consider more closely who are the potential winners and losers when an integrated system is constructed according to the Ramsey pricing approach, and prices change. A relevant environment in which distributional effects can be studied is the hub-and-spoke transport model, which can be designed properly under price integration. Even before integration, however, a large number of passengers in metropolitan areas travel from the periphery to the central area commuting there at some point before travelling to their final destination, thus even giving rise to an unplanned hub-and-spoke system. The distributional characteristics of hub-and-spoke models have been widely studied with reference to air transport. Let us consider the problem of second best pricing in two possible hub-and-spoke regimes. The first considers each spoke and the hub11 as separate entities that must fulfill their own budget constraints, and the second implies the formulation of a single Ramsey pricing problem for the whole system. In dealing with a problem of this type with reference to airport pricing, Oum et al. (1996) found that, in passing from a non-integrated to an integrated regime, prices should increase in the hub and decrease on the spokes. This is due to the advantage of encouraging trips from the periphery, thus giving positive externalities to the hub. On the other hand, in the integrated system, thanks to the larger demand originating from the spokes,
10 When the budget of the transport services must be balanced instead, the cost of funds is measured by the Lagrange multiplier of the budget constraint, as only those who consume the services are taxed and bear an excess burden. 11 By hub we mean here one or many central links that are used for the transshipment of passengers from one area of the town to another.
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congestion in the hub is likely to be higher than in the case without price integration, thus justifying price increases. This approach would thus suggest that, while price integration can improve overall efficiency, periphery residents stand to gain and inhabitants of the central area to lose. Empirical studies also suggest that redistribution benefits periphery residents. In a study about collective transport in the area of San Francisco Bay, Train (1991) found a rigid demand in the central area and a more elastic one in the periphery. Suburbian residents had higher incomes and thus greater opportunities for shifting to other transport modes (mainly automobile). Hence integrated Ramsey prices provided for larger mark-ups in the central area, and gave rise to perverse cross-subsidization. Poor inhabitants of the central area were requested to pay a large share of the fixed costs of the whole system. Problems of this type if not solved from the outset through income redistribution measures could be dealt with by departing from Ramsey prices, and requesting that fixed costs clearly attributable to a component of the system be paid by the passengers who benefit from it. Current European experience with tariff integration in local public transport strongly confirms that price integration benefits periphery residents. Integration policies are mainly characterized by discounts provided to buyers of passes, travelcards and the like (see e.g. Pucher and Kurth 1996). These documents are designed for medium and long distance regular travellers, who can benefit from the possibility of interchanging freely between modes (bus, tram, underground etc.) in order to supplement the link between their origin and destination. As non-integrated documents are also still often made available for sub-links and specific connections, discounts are deemed necessary in order to convince the customers to shift to integration and to attract new demand. Periphery residents thus seem the main beneficiaries of integration, to such a large degree that the financial performance of the services involved, notwithstanding demand increases, has often been negatively affected, and the public budget has had to provide the needed resources (see e.g. Matas (2003) for the case of Madrid and the references quoted therein). Matas (2003) argues that, in setting prices, there might have been an overvaluation of the elasticity of demand of long distance travellers who resort to travelcards. In Italy, in order to avoid awarding huge discounts to customers who buy passes and to prevent the negative impact of tariff integration upon the budgets of the firms involved, often only multi-modal
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integrated passes are offered to long-distance travellers. Thus, a regular commuter from the periphery can only buy a monthly pass that also includes the right to travel in the whole inner area. This is pure bundling and is likely to imply distributional effects and crosssubsidies unlike those pointed out earlier. The customers who are characterized by a low willingness to pay for one of the components of the bundle (typically, links in the central area) are expropriated of some of their surplus from other products (mainly the long distance link); in Rome and Turin periphery residents have complained. In Italy, long distance trains and buses, whose routes were often designed before the expansion of the metropolitan areas, mainly bring the commuters well inside the city. The transport system of the central area (for which commuters now have to pay) does not add very much to their welfare, with few exceptions. While the low rates of all local transport fares in Italy has prevented shifts to car transport, no huge increase of patronage resembling that mentioned for other European cities has occurred after price integration.

Conclusions

Price integration can produce efficiency gains in local public transport of metropolitan areas. This fact often obscures the possible negative implications stemming from distributive conflicts. In this paper we have shown that a standard argument in favour of integration of pricing decisions under monopolistic supply, i.e. the possibility of cutting prices in all the links of a network, does not carry over to the case of benevolent regulation. Moreover, integrating benevolent regulators can increase efficiency, but at the price of accepting the introduction of cross-subsidies among the previous regulatory jurisdictions. Both theoretical research and empirical analysis suggest that the redistributive consequences related to price integration favour periphery residents. In practice, the benefits enjoyed by customers located in suburban areas might even be greater than those arising under benevolent regulation and Ramsey pricing, thanks to increased transfers from the public budget that often accompany price integration processes in Europe. Basing price design under integration more clearly upon the elasticity of demands of different groups of potential customers may render price integration a more valuable opportunity for increased efficiency and larger patronage of public transport without adverse budget effects.
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Fares of integrated systems could also be designed with a clear eye to avoiding excessive redistributional effects. For example, if there are fixed costs clearly attributable to only certain services, the passengers involved could be requested to pay for them, in order to reduce the level of cross-subsidization, even if this implies violating Ramsey pricing requirements. Sacrificing efficiency to some degree would allow closer adherence to the benefit principle. Resorting to a pure bundling arrangement (under which only integrated documents are made available) is likely to raise further distributive problems instead.
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MATAS, A., 2003, Demand and revenue implications of an integrated public transport policy. The case of Madrid, Working Paper 4, Department of Applied Economics, Universitat Autonoma de Barcelona. PELS, E., NIJKAMP, P. and RIETVELD, P., 2000, A note on the optimality of airline networks, Economic Letters, 69, 42934. OUM, T.H., ZHANG, A. and ZHANG, Y., 1996, A note on optimal airport pricing in a hub-and-spoke system, Transportation Research Part B, 30, 1118. PUCHER, J. and KURTH, S. 1996, Verkehrsverbund: the success of regional public transport in Germany, Austria and Switzerland, Transport Policy, 2, 27991. ROSON, R. and VAN DEN BERGH, J.C.J.M., 2000, Network markets and the structure of networks, Annals of Regional Science, 197211. TRAIN, K.E., 1991, Optimal Regulation, MIT Press, Cambridge MA. VARIAN, H.R., 1989, Price discrimination, in R. Schmalensee and R. D. Willig (eds), Handbook of Industrial Organization Vol. I, Elsevier, pp. 597666.

Effets de bien-etre de lintegration des prix dans le domaine du transport public local

Dans les regions metropolitaines, le transport collectif est souvent assure par de nombreuses firmes et selon differents modes. Larticle se penche sur la prise de decision relative aux prix dans deux regimes de marche : le monopole et une regulation bienveillante via une tar` ification a la Ramsey. Les resultats confirment que la centralisation entrane des gains defficacite en situation de monopole lorsquun fournisseur unique remplace de nombreuses entreprises desservant une partie du reseau. En situation de regulation bienveillante, au contraire, la centralisation ninduit des gains defficacite que dans certaines conditions. En outre, des ameliorations defficacite via la ` tarification a la Ramsey implique lintroduction de subsidiation croi see avec les instances de regulation intervenant en amont. Ainsi certains utilisateurs sont gagnants tandis que dautres y perdent. Tant la ` litterature theorique quempirique suggere que les residents de la per ipherie sont les principaux beneficiaires de la centralisation.

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A. CASSONE AND C. MARCHESE

Wohlfahrtseffekte von Preisintegration im offentlichen Personennahverkehr

In stadtischen Raumen werden offentliche Verkehrsleistungen oft von vielen Unternehmen und in vielerlei Weise erbracht. Der Beitrag fokussiert auf die Zusammenfassung der Entscheidungen uber die Preise unter zwei Marktregimen: Monopol und mittels Ramsey-Preisbildung ,,wohlwollende Regulierung. Die Ergebnisse bestatigen, dass Zentralisierung zu Effizienzgewinnen unter Monopolbedingungen immer dann fuhrt, wenn ein einziger Anbieter viele Unternehmen substituiert, indem er jeden Teil des Netzes bedient. Bei ,,wohlwollender Regulierung treten Effizienzgewinne dagegen nur unter bestimmten Bedingungen auf. Auerdem involvieren Effizienzverbesserungen bei Ramsey-Preisbildung die Einfuhrung von Quersubventionierungen unter fruher eintretenden regulatorischen Behorden. Somit gewinnen einige Nutzer, wahrend andere verlieren. In der theoretischen wie in der empirischen Literatur wird die Auffassung vertreten, dass die Einwohner an der Peripherie die Hauptnutznieer einer Zentralisierung sind.
Beneficios sociales de la integracion de precios en el ambito del transporte publico local

En las regiones metropolitanas el transporte publico se presta por diferentes empresas y con distintas modalidades. El artculo se centra en la toma de decisiones relativas a los precios en dos regmenes de mercado: el monopolio y una regulacion por tarificacion. Los resulta dos confirman que la centralizacion comporta ganancias de eficiencia en situacion de monopolio cuando un proveedor unico reemplaza a varias empresas en un segmento concreto de la red. Por el contrario, en regimen de regulacion la centralizacion solo comporta ganancias de eficiencia en determinadas condiciones. Ademas, la mejora de eficien cia va tarificacion implica la introduccion de subsidiaciones cruzadas entre las instancias de regulacion precedentes. As, algunos usuarios ganan mientras que otros pierden. Tanto la literatura teorica como la emprica sugieren que los residentes de la periferia son los principales beneficiarios de la centralizacion.

#CIRIEC

2005