“The War for the Fare”: How Driver Compensation Affects Bus System Performance

Prior to 2007, two systems of bus driver compensation coexisted in Santiago, Chile: one paid drivers per passenger transported, while the other paid a fixed wage. Per-passenger drivers engaged in “The War for the Fare,” altering their driving patterns to compete for passengers. Examining these systems on similar routes in Santiago, we reach two key findings. Compared with the fixed-wage system, the per-passenger system leads to (1) 13% shorter passenger wait times, via reduced bunching of buses, and (2) 67% more accidents per kilometer driven, via more aggressive driving. We discuss implications for the design of incentives in public transit.


First version: January 2005

This version: February 2011

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