#TIL: The Mohring Effect
An engineer, an economist and a journalist walk out of a bar and head to the bus stop over the course of an hour. If the bus comes once every hour, the average waiting time for them is about 30 minutes. If the engineer, the economist and the journalist were accompanied by their respective groups and frequency of buses increased to two per hour to meet their demand, then their waiting time would decrease to 15 minutes.
Herbert Mohring, a transportation economist, propounded that presence of new passengers lowered the cost for the existing passengers. In other words, urban public transit demonstrates significant ‘economies of scale’ if passenger waiting period is factored in the cost function. Interestingly, this effect is opposite to the road congestion effect, where an increase in the number of users decreases the speed and quality of services for other users.
This concept is often cited to buttress the need for subsidizing public transit. Wherever Mohring effect is relevant, subsidies are required to make the vehicular frequency socially optimal. To understand it further, if the engineer, the economist and the lawyer wait for 30 minutes on average for the hourly bus, making it their average cost. The introduction of another hourly bus reduces their waiting time to 15 minutes, making it their marginal cost. The average cost in this case exceeds the marginal cost. A subsidy that bridges the gap between the marginal cost and the average cost is said to contribute to welfare.
This notion has received both recognition and rebuttal. Peran Van Reevan -transport economist at the Erasmus School of Economics of the Erasmus University Rotterdam, in 2008, refuted the arguments by promulgating that a profit-driven monopolist will prioritise a frequency that either exceeds or matches the social welfare. Furthering this, Van Reevan deduced that “economies of scale do not constitute a justification for general subsidization of urban public transit”. Mohring Effect holds immense relevance in today’s urban mobility because it gives us fundamental insights on the service levels and financial mechanisms of public transit.
Today I learnt (TIL) is a weekly series by OMI that brings you interesting nuggets of information that you didn’t know you needed.
