Public Transit Bus Procurement: The Role of Energy Prices, Regulation and Federal Subsidies

Working Paper No. 19964 The U.S. public transit system represents a multi-billion dollar industry that provides essential transit services to millions of urban residents. We study the market for new transit buses that features a set of non-profit transit agencies purchasing buses primarily from a fe...

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Bibliographic Details
Published inNBER Working Paper Series p. 19964
Main Authors Li, Shanjun, Kahn, Matthew E, Nickelsburg, Jerry
Format Paper
LanguageEnglish
Published Cambridge National Bureau of Economic Research, Inc 01.03.2014
Subjects
Air pollution
Automobiles
Brand loyalty
Buses
Economic theory
Emission standards
Energy efficiency
Energy prices
Gasoline prices
Hypotheses
Management decisions
Natural gas
Profits
Public transportation
Purchasing
Regulation
Subsidies
Transportation services
Vehicles
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Summary:Working Paper No. 19964 The U.S. public transit system represents a multi-billion dollar industry that provides essential transit services to millions of urban residents. We study the market for new transit buses that features a set of non-profit transit agencies purchasing buses primarily from a few domestic bus makers. Unlike private vehicles, the fuel economy of public buses is irresponsive to fuel price changes. To understand this finding, we build a model of bus fleet management decisions of local transit agencies that yields testable hypotheses. Our empirical analysis of bus fleet turnover and capital investment suggests that transit agencies: (1) do not respond to energy prices in either their scrappage or purchase decisions; (2) respond to environmental regulations by scrapping diesel buses earlier and switch to natural gas buses; (3) prefer purchasing buses from manufacturers whose assembly plants are located in the same state; (4) exhibit significant brand loyalty or lock-in effects; (5) favor domestically produced buses when they have access to more federal funding.
ISSN:0898-2937
DOI:10.3386/w19964