Performance-based regulation of train service delays: Hong Kong

ABSTRACT

This paper studies performance-based regulation of train service delays in Hong Kong. Motivated by the criticism that the Mass Transit Railway (MTR) offers fare rebates deemed too small for long service delays, our logit analysis of a stated choice experiment’s data collected from 1,559 MTR users in Q4:2020 yields the following findings: (1) the disaggregate willingness to pay (WTP) estimates that ignore passenger attributes are HK$21 to HK$37 for a 15- to 60-minute train service delay announced to occur in a 1-hour period; (2) increasing the period by one hour raises these estimates by ~HK$16; (3) accounting for passenger attributes magnifies these estimates by ~18%; and (4) the aggregate WTP estimates are 1.3 to 4.9 times MTR’s existing rebates for rush-hour delays and 0.5 to 1.9 times for non-rush-hour delays. Hence, aligning MTR’s rebates with the aggregate WTP estimates likely incentivizes MTR to reduce long service delays.

KEYWORDS:

• Willingness to pay
• train service delays
• stated choice experiment
• Hong Kong

JEL CLASSIFICATION:

• D11
• D60
• R41
• R48

Acknowledgments

This paper is based on C.K. Woo’s research project (No. 2020.A5.071.20A) funded by the Hong Kong Government’s Policy Innovation and Co-ordination Office. We thank a diligent reviewer for helpful comments that have greatly improved the paper’s content and exposition. Without implications, all errors are ours.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ https://www.scmp.com/comment/letters/article/2160249/mtr-service-disruptions-require-bigger-stick-small-fines-long-delays

² The identification process does not consider household income because Table 3 shows that income data are only available for 72% of the 1,559 survey respondents, far less than the 98% availability of education data. Further, the positive correlation between income and education mitigates the need for income data in explaining variations in the choice data.

³ Available at https://www.youtube.com/watch?v=YgYuRGre6AA, the South China Morning Post’s documentary movie chronicles Hong Kong’s 2019 social movement.

⁴ The Monthly Traffic and Transport Digest is available at https://www.td.gov.hk/en/transport_in_hong_kong/transport_figures/monthly_traffic_and_transport_digest/index.html

⁵ On 9 June 2019, an estimated one million people taking to the street to oppose the Hong Kong Government’s proposed bill which would permit the extradition of alleged offenders from Hong Kong to Mainland China for trial. Despite the extradition bill’s indefinite suspension announced on 15 June 2019, the initially peaceful protests morphed into the social movement that according to MTR’s 2019 annual report (p.37) had caused ~6% year-to-year decline in MTR’s annual ridership.

⁶ Covid-19 is a global pandemic, severely damaging Hong Kong’s economy. Relative to the first half of 2019, MTR’s ridership plunged ~30% in the first half of 2020, chiefly because of fear of infection and the Hong Kong Government’s suppression responses to Covid-19’s surging spread, including cross-border travel restriction, business and school closure, public event cancelation, shortened operating hours of restaurants and entertainment venues, no access to public facilities like museums and libraries, limit on group gatherings (≤ 4 persons), social distancing (≥ 1.5 metres), and home isolation.

⁷ http://www.mtr.com.hk/archive/ch/pdf/mtr_service_newsletter_q1_2020.pdf

⁸ Hong Kong’s number of public holidays is 18 in 2020, implying an average of 1.5 holidays per month. As there are typically 21 weekdays in a month, we assume 19.5 (= 21–1.5) is the average number of working weekdays in a month.

⁹ The numbers of cars per train come from https://www.mtr.com.hk/en/corporate/operations/detail_worldclass.html

Additional information

Funding

This work was supported by the Hong Kong Government’s Policy Innovation and Co-ordination Office [No. 2020.A5.071.20A].