Public Transit Capacity and Users Choice: An Experiment on Downs-Thomson Paradox

We study the Downs-Thomson paradox, a situation where an additional road capacity can cause an overall increase in transport generalized cost and therefore a decrease in welfare for transport users. To this end, we build an experiment based on a double market-entry game (DMEG) where users have to choose between road and public transit after that the operator has choosen public transit capacity. The optimal strategy for operator is to minimize capacity, and the equilibrium for users depend on the endogeneous public transit capacity compared to exogeneous road capacity. The most important result is that we observe the Downs-Thomson paradox empirically in the laboratory: An increase in road capacity causes shift from road to rail and, at the end, increases total travel costs. But the contrary is not true: A decrease in road capacity does not cause lower total travel costs, which is in contradiction with our theoretical model. Results also show that the capacity chosen by operator di¤ers from Nash prediction, levels being signi…cantly higher than those predicted by our model. Moreover, users coordinate remarkably well on Nash equilibrium entry rate while capacity has been chosen by operator. University of Rennes 1 and CREM-CNRS, 7 place Hoche, 35065 Rennes cedex, France. yWe thank Richard Arnott, Rachel Croson, Michael Pickhardt and Aurélie Bonein for useful remarks. Thanks to Elven Priour for programming and organizing the experimental sessions. 1 ha ls hs -0 04 06 22 3, v er si on 1 21 J ul 2 00 9 Author manuscript, published in "4th Kuhmo-Nectar Conference “transport and urban economics”, copenhagen : Denmark (2009)"