Abstract
CERTAIN ASPECTS OF THE RECENT DISCUSSION IN THIS JOURNAL OF OPTIMAL PRICING IN SCHEDULED SERVICES AND ITS IMPLICATIONS FOR SUBSIDIES ARE DEVELOPED AND EXTENDED. THE ANALYSIS SUGGESTS THAT IF THE RELEVANT ELASTICITIES ARE OF THE ORDER OF MAGNITUDE SUGGESTED BY EMPIRICAL STUDIES, IN AN OPTIMAL SITUATION SUBSIDIES COULD COVER A SUBSTANTIAL PROPORTION OF TOTAL COSTS. IN PRACTICE, INSTITUTIONAL FACTORS MAY PREVENT THE POTENTIAL BENEFITS OF SUBSIDIES BEING REALISED BUT IT IS SUGGESTED THAT THE POSSIBILITY OF THIS HAPPENING COULD BE REDUCED BY LINKING SUBSIDIES TO THE CONTROL OF FARES. SOME OTHER IMPLICATIONS OF THE ANALYSIS ARE ALSO CONSIDERED.(Author/publisher).