Crowding-in or crowding out: An empirical analysis on the effect of subsidies on individual willingness-to-pay for public transportation

• User knowledge about public subsidies affects WTP for public transport services.
• Crowding-in as well crowding-out effects in WTP can be verified.
• Crowding-in effects in WTP predominate in our study.
• Personal attitudes and beliefs cause the direction and level of crowding.
• Free riding incentives (inequity concern) positively affect crowding-out (-in).

Public transportation throughout the world is highly subsidized. User knowledge about public subsidies may affect their willingness to pay for public transport services and alter demand and related passenger fare revenues. This is especially relevant in view of the increasing availability of information about public subsidies. An empirical study reveals a crowding-in effect, on average, on WTP (willingness to pay) as a result of access to information about public subsidies that generates concerns of fairness. Crowding-out effects also occur, caused by considerations of double financing and free-riding, although they are minor. Study results show that public transportation companies as well as financing institutions should highlight the existence of subsidies to produce crowding-in effects in the WTP for public transportation, to maximize public valuation (WTP) of public transportation. This should increase self-generated revenues of public transportation services.