In most countries of Europe, different levels of government, from municipal to national, subsidize demand responsive transportation (DRT) for different target groups, e.g.: the handicapped, the elderly, and even for the residents of low density areas, where scheduled bus transportation would be too expensive to provide because of low demand. Urban sprawl combined with the greying of the suburbs and of the countryside, together with a growing awareness for the needs for social inclusion of the handicapped put the budgets for these subsidized transportation services on the fast-growing trend. The strategies put forward by the public authorities to contain these growing costs vary from country to country but basically, they rely on two ingredients: (i) combine as much as possible the services for different target groups, and (ii) try to introduce competition when tendering these services to the transport operators. These two strategies are intimately interwoven since the number of competitors and hence competition for the markets depends on the size of the market, and the size of market depends on the ability of the various public authorities to work together and allow regrouping these different services into the same vehicles. Everywhere, taxicabs play a substantial role in these markets. In most countries of Northern Europe, from France to Norway, outside of the big cities, these subsidized transportation markets represent from 70 to 95% of the turnover of the taxicab operators. DRT markets, especially in rural areas, exhibit several features of natural monopoly, from economies of scale (e.g.: DRT corridors) and economies of scope (e.g.: diversity in the vehicle fleet) to economies of reputation (e.g.: call centre and radio dispatch centres). These monopoly features tend to favour larger firms. It is thus difficult to design a tendering process that would not crowd out (and thus kill) small taxi operators. Several regions in Denmark, Sweden, and the Netherlands seem to have come up with different and innovative solutions to this problem. We evaluate these solutions and check to which extent they depend on the local institutional framework and on the national taxicab regulation.
