Urban travel: competition and pricing

The transport problems that urban centres now face (as regard congestion, t he environment and public deficits) have led to an examination of competiti on in the sector. Some countries have moved towards the deregulation or pri vatization of urban public transport, influenced by developments in the the ory of contestable markets. These analyses could potentially provide a mean s of increasing the efficiency of public services and, hence, public transp ort. However, the authors do not feel that they can deal with the full exte nt of the problem. Particularly in urban areas, there is a need nowadays to examine the issue of competition between the passenger car and public tran sport, especially from the pricing angle. In France, decades of policy stro ngly influenced by a preference for the car have prevented this problem fro m being a central concern for researchers and decision-makers. The approach to the problem has mainly been centred on increasing urban supply to meet demand better. However, a failure to consider pricing, and the subsidizatio n phenomena that can occur as a result, affects the shape of supply systems . Pricing, through its action on demand, acts on supply by increasing or re ducing its potential profitability. 'Snowball' effects can, therefore, mean that slight underpricing results in the domination of one transport mode. These effects have been revealed in particular by work in the new field of network economics. The example of the Lyon conurbation shall be used to ill ustrate the case, which is that car travel is underpriced. The basis of the expose will be a detailed analysis of the externalities associated with th e car, i.e. the costs of car use and the revenue it raises for the communit y. The second part of the paper is a study of several urban travel policies in Europe (France, UK, Switzerland, Italy) to show the 'effects' of this u nderpricing. Where supply has followed the pressure of demand, the dominanc e of the car has been reinforced. However, in cities, particularly in Switz erland, where supply has been restricted, this dominance has been considera bly moderated. On the other hand, it can be seen from the French example th at taking strong action to improve public transport is not in itself suffic ient to increase usage. Several lessons can be learnt from this work. First , it is shown, if it was still necessary to do so, that the problems of urb an travel require a comprehensive and coherent approach. Modal policy must, therefore, be assessed with reference to the entire transport system. Next , in connection with the issue of regulation, it is important to consider t he issue of competition in urban areas, and not only competition between pu blic transport operators, but also (and even above all) competition within the entire system of personal and public transport. Finally, with regard to pricing, the ratchet effects that benefit the car as a result of its under pricing in urban areas need to be studied.