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Unlock Riders' Loyalty: How Strategic Subsidies Can Transform Public Transit

Kai Mendoza in Business & Economy December 2025 • 4 min read.

"Discover how temporary bundle subsidies, inspired by tech and tailored to consumer behavior, can revolutionize public transportation and foster long-term ridership."

In the dynamic world of urban mobility, innovation often meets consumer uncertainty. When introducing new transportation options, such as ridesharing services integrated with public transit, potential riders may be hesitant due to unfamiliarity with the service's quality and reliability. To overcome this hurdle, a strategy gaining traction involves offering bundled goods—combining the new service with a familiar, trusted option—often at a discounted rate. This approach aims to reduce perceived risk and encourage initial adoption.

These discounted bundles are designed to incentivize what economists call 'learning.' By making the bundled service more attractive, individuals are more likely to try it, gather information about its quality, and potentially incorporate it into their regular routines. The key question then becomes: can these temporary incentives create lasting changes in behavior, benefiting both consumers and public transit systems?

A recent study conducted in São Paulo, Brazil, sheds light on this very question. By examining data from a randomized experiment involving subsidized ridesharing trips integrated with train and metro stations, researchers uncovered intriguing patterns about how temporary subsidies can lead to long-term shifts in transportation choices. The results offer valuable insights for policymakers and urban planners looking to enhance public transit usage and promote sustainable mobility.

The Power of Bundled Subsidies: Stimulating Ridership Through Learning

The research, led by Luis Antonio F. Alvarez and Ciro Biderman, explores the impact of temporary subsidies on bundled transportation services. Their work provides both theoretical support and empirical evidence demonstrating how these subsidies can induce long-run changes in demand. The core mechanism at play is learning: riders discover the quality and convenience of a new service (in this case, integrated ridesharing) through repeated use, incentivized by the subsidy.

To understand this phenomenon, the researchers developed a model where individuals learn about the quality of an innovation through repeated consumption. They then tested the model's predictions using data from a real-world experiment on a ridesharing platform in São Paulo. The experiment involved subsidizing car trips that integrated with train or metro stations, effectively creating a bundled service.

Semiparametric Approach: Given the complex nature of rider behavior, the study employed a sophisticated semiparametric approach to analyze the data. This method allowed for the construction of more efficient estimators, capturing the heavy-tailed nature of demand and providing a nuanced understanding of treatment effects.
Efficient Estimator: By relying on L-moments, the researchers introduced an efficient estimator tailored to their specific model. This technique ensured robust and reliable results, even in the face of data complexities.

The findings revealed that a ten-weekday, 50% discount on integrated trips led to a significant immediate increase in demand. More importantly, the study uncovered lasting changes in the mean and dispersion of non-integrated app rides, persisting for over four months after the subsidy ended. A calibration of their theoretical model suggested that approximately 40% of the initial increase in integrated rides could be attributed to increased incentives for learning, highlighting the profound impact of subsidies on rider behavior.

Implications for Sustainable Urban Transit

These findings offer crucial insights for designing effective public transit systems. By strategically using temporary subsidies on bundled services, cities can encourage riders to try new, integrated options and discover their benefits firsthand. This approach not only boosts immediate ridership but also fosters long-term loyalty and a greater appreciation for public transportation. As cities strive to create more sustainable and efficient urban environments, understanding the learning effects of subsidies will be essential for shaping the future of mobility.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: https://doi.org/10.48550/arXiv.2311.01217,

Title: The Learning Effects Of Subsidies To Bundled Goods: A Semiparametric Approach

Subject: econ.em

Authors: Luis Alvarez, Ciro Biderman

Published: 02-11-2023

Everything You Need To Know

How can cities effectively use subsidies to encourage riders to adopt new integrated public transit options?

Cities can strategically implement temporary subsidies on bundled services, which combine new options like ridesharing with existing public transit. This encourages riders to try these integrated options and discover their benefits firsthand. The study in São Paulo demonstrated that a ten-weekday, 50% discount on integrated trips led to a significant immediate increase in demand and lasting changes in rider behavior, even after the subsidy ended. This is achieved through 'learning' where riders experience the quality and convenience of a new service, incentivized by the subsidy, potentially incorporating it into their regular routines.

What is meant by 'learning' in the context of transportation subsidies, and how does it impact long-term ridership?

In the context of transportation subsidies, 'learning' refers to the process where individuals gain information and experience about the quality and convenience of a new transportation service, such as integrated ridesharing, through repeated use incentivized by temporary discounts. As riders use the subsidized service, they learn about its reliability and efficiency, potentially leading to a change in their long-term transportation choices. The study by Luis Antonio F. Alvarez and Ciro Biderman suggests that a significant portion of the initial increase in ridership due to subsidies can be attributed to this 'learning' effect, fostering long-term loyalty and a greater appreciation for public transportation.

What were the key findings of the São Paulo study regarding the use of bundled subsidies for public transit?

The São Paulo study, led by Luis Antonio F. Alvarez and Ciro Biderman, found that temporary bundled subsidies on ridesharing trips integrated with train and metro stations led to a significant immediate increase in demand. More importantly, the study uncovered lasting changes in the mean and dispersion of non-integrated app rides, persisting for over four months after the subsidy ended. The calibration of their theoretical model suggested that approximately 40% of the initial increase in integrated rides could be attributed to increased incentives for learning. These findings highlight the effectiveness of using temporary subsidies to promote long-term shifts in transportation choices.

What is a 'semiparametric approach' and why was it important in the study of rider behavior in São Paulo?

A 'semiparametric approach' is a statistical method that combines parametric and nonparametric techniques to analyze data. In the São Paulo study, researchers employed this approach due to the complex nature of rider behavior. This method allowed for the construction of more efficient estimators, capturing the heavy-tailed nature of demand and providing a nuanced understanding of treatment effects. By relying on L-moments, the researchers introduced an efficient estimator tailored to their specific model which ensured robust and reliable results, even in the face of data complexities.

What are the implications of using bundled subsidies on integrated transportation services for creating sustainable urban transit systems?

The strategic use of temporary subsidies on bundled services can encourage riders to try new, integrated options and discover their benefits firsthand. This not only boosts immediate ridership but also fosters long-term loyalty and a greater appreciation for public transportation. As cities strive to create more sustainable and efficient urban environments, understanding the learning effects of subsidies will be essential for shaping the future of mobility. This method helps in reducing consumer uncertainty regarding new services and incentivizes them to incorporate public transport into their regular routines. By inducing 'learning', these subsidies are effective tools for achieving sustainable urban transit.