IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v190y2024ics0965856424002957.html
   My bibliography  Save this article

Choosing a flat rate over a pay-per-use tariff for public transport: Do psychological factors matter?

Author

Listed:
  • Weibel, Christian
  • Dang, Lisa
  • von Arx, Widar

Abstract

We investigate the relationship between various psychological factors (taximeter effect, flexibility effect, cost control effect, pre-commitment effect), annual distance traveled, and public transport tariff preferences (pay-per-use vs. flat rate). While a pay-per-use tariff entails ticket prices depending on usage intensity, a flat rate involves an annual public transport subscription covering all journeys within a year. Drawing from a sample of 3,381 Swiss public transport customers utilizing either the pay-per-use option or holding a flat-rate subscription, a binomial logistic regression highlights that the number of passenger kilometers traveled (pkm) predominantly influences the choice of a flat rate. However, the examined psychological factors also significantly shape decision-making. Notably, these effects vary based on the quantity of the product consumed. Specifically, both the taximeter and cost-control effects tend to increase with pkm. Conducting a simulation using binomial logistic regression, we illustrate how different psychological factors are related to the likelihood of opting for a flat-rate subscription. The findings suggest that the level of importance of the psychological factors are relevant to predict the odds of selecting a flat-rate subscription. Hence, emphasizing product advantages in marketing communications and strategically adjusting product design to leverage these psychological factors emerge as effective strategies for enhancing sales promotion and fostering customer loyalty. These results offer insights into consumer psychology and decision-making within the transportation sector. The implications are particularly valuable for managers aiming to address barriers to public transport use. By strategically refining ticket product ranges, managers can actively contribute to reducing CO2 emissions through induced modal shifts.

Suggested Citation

  • Weibel, Christian & Dang, Lisa & von Arx, Widar, 2024. "Choosing a flat rate over a pay-per-use tariff for public transport: Do psychological factors matter?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 190(C).
  • Handle: RePEc:eee:transa:v:190:y:2024:i:c:s0965856424002957
    DOI: 10.1016/j.tra.2024.104247
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856424002957
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.tra.2024.104247?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fabian Herweg & Konrad Mierendorff, 2013. "Uncertain Demand, Consumer Loss Aversion, And Flat-Rate Tariffs," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 399-432, April.
    2. Alexandre Mayol & Carine Staropoli, 2021. "Giving consumers too many choices: a false good idea? A lab experiment on water and electricity tariffs," European Journal of Law and Economics, Springer, vol. 51(2), pages 383-410, April.
    3. Krämer, Jan & Wiewiorra, Lukas, 2012. "Beyond the flat rate bias: The flexibility effect in tariff choice," Telecommunications Policy, Elsevier, vol. 36(1), pages 29-39.
    4. Nicole Koschate-Fischer & Katharina Wüllner, 2017. "New developments in behavioral pricing research," Journal of Business Economics, Springer, vol. 87(6), pages 809-875, August.
    5. Koichiro Ito, 2014. "Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing," American Economic Review, American Economic Association, vol. 104(2), pages 537-563, February.
    6. Katharina Dowling & Lucas Stich & Martin Spann, 2021. "An experimental analysis of overconfidence in tariff choice," Review of Managerial Science, Springer, vol. 15(8), pages 2275-2297, November.
    7. Drazen Prelec & George Loewenstein, 1998. "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, INFORMS, vol. 17(1), pages 4-28.
    8. Turnovsky, Stephen J, 1971. "A Model of Consumer Behavior under Conditions of Uncertainty in Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 12(1), pages 39-53, February.
    9. Daniel Hörcher & Daniel Graham, 2020. "Pricing and Efficient Public Transport Supply in a Mobility as a Service Context," International Transport Forum Discussion Papers 2020/15, OECD Publishing.
    10. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    11. Kienzler, Mario & Kowalkowski, Christian & Kindström, Daniel, 2021. "Purchasing professionals and the flat-rate bias: Effects of price premiums, past usage, and relational ties on price plan choice," Journal of Business Research, Elsevier, vol. 132(C), pages 403-415.
    12. Dowling, Katharina & Manchanda, Puneet & Spann, Martin, 2021. "The existence and persistence of the pay-per-use bias in car sharing services," International Journal of Research in Marketing, Elsevier, vol. 38(2), pages 329-342.
    13. Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
    14. Stefano DellaVigna & Ulrike Malmendier, 2006. "Paying Not to Go to the Gym," American Economic Review, American Economic Association, vol. 96(3), pages 694-719, June.
    15. Sridhar Balasubramanian & Shantanu Bhattacharya & Vish V. Krishnan, 2015. "Pricing Information Goods: A Strategic Analysis of the Selling and Pay-per-Use Mechanisms," Marketing Science, INFORMS, vol. 34(2), pages 218-234, March.
    16. Klaus Wertenbroch, 1998. "Consumption Self-Control by Rationing Purchase Quantities of Virtue and Vice," Marketing Science, INFORMS, vol. 17(4), pages 317-337.
    17. Itai Ater & Vardit Landsman, 2013. "Do Customers Learn from Experience? Evidence from Retail Banking," Management Science, INFORMS, vol. 59(9), pages 2019-2035, September.
    18. Brown,Stephen J. & Sibley,David Sumner, 1986. "The Theory of Public Utility Pricing," Cambridge Books, Cambridge University Press, number 9780521314008, January.
    19. Wallimann, Hannes & Blättler, Kevin & von Arx, Widar, 2023. "Do price reductions attract customers in urban public transport? A synthetic control approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 173(C).
    20. Eugenio J. Miravete, 2002. "Estimating Demand for Local Telephone Service with Asymmetric Information and Optional Calling Plans," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 943-971.
    21. Sejeong Yun & Kwanho Suk, 2022. "Consumer preference for pay-per-use service tariffs: the roles of mental accounting," Journal of the Academy of Marketing Science, Springer, vol. 50(5), pages 1111-1124, September.
    22. Wardman, Mark & Toner, Jeremy & Fearnley, Nils & Flügel, Stefan & Killi, Marit, 2018. "Review and meta-analysis of inter-modal cross-elasticity evidence," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 662-681.
    23. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    24. Seunghee Han & Jooyong Jun & Eunjung Yeo, 2021. "In Pursuit of Sustainable Mobile Policy: A Study of Consumer Tariff Preferences under Uncertainty," Sustainability, MDPI, vol. 13(2), pages 1-20, January.
    25. Lisa Dang & Widar von Arx, 2021. "How Can Rail Use for Leisure and Tourism Be Promoted? Using Leisure and Mobility Orientations to Segment Swiss Railway Customers," Sustainability, MDPI, vol. 13(11), pages 1-19, May.
    26. Arkes, Hal R. & Blumer, Catherine, 1985. "The psychology of sunk cost," Organizational Behavior and Human Decision Processes, Elsevier, vol. 35(1), pages 124-140, February.
    27. Anders Bondemark & Henrik Andersson & Anders Wretstrand & Karin Brundell-Freij, 2021. "Is it expensive to be poor? Public transport in Sweden," Transportation, Springer, vol. 48(5), pages 2709-2734, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schuster, Emanuel & Spann, Martin, 2024. "Pay today, or delay the pay: Consumer preference for double flat-rate pricing plans," Journal of Business Research, Elsevier, vol. 182(C).
    2. Arkes, Hal R. & Hirshleifer, David & Jiang, Danling & Lim, Sonya, 2008. "Reference point adaptation: Tests in the domain of security trading," Organizational Behavior and Human Decision Processes, Elsevier, vol. 105(1), pages 67-81, January.
    3. Milkman, Katherine L. & Beshears, John, 2009. "Mental accounting and small windfalls: Evidence from an online grocer," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 384-394, August.
    4. Stephen Leider & Özge Şahin, 2014. "Contracts, Biases, and Consumption of Access Services," Management Science, INFORMS, vol. 60(9), pages 2198-2222, September.
    5. Manel Baucells & Woonam Hwang, 2017. "A Model of Mental Accounting and Reference Price Adaptation," Management Science, INFORMS, vol. 63(12), pages 4201-4218, December.
    6. Sejeong Yun & Kwanho Suk, 2022. "Consumer preference for pay-per-use service tariffs: the roles of mental accounting," Journal of the Academy of Marketing Science, Springer, vol. 50(5), pages 1111-1124, September.
    7. Silva, Emmanuel Marques & Moreira, Rafael de Lacerda & Bortolon, Patricia Maria, 2023. "Mental Accounting and decision making: a systematic literature review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    8. Damon Clark & David Gill & Victoria Prowse & Mark Rush, 2020. "Using Goals to Motivate College Students: Theory and Evidence From Field Experiments," The Review of Economics and Statistics, MIT Press, vol. 102(4), pages 648-663, October.
    9. Ronayne, David & Sgroi, Daniel & Tuckwell, Anthony, 2021. "Evaluating the sunk cost effect," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 318-327.
    10. Genakos, Christos & Roumanias, Costas & Valletti, Tommaso, 2023. "Is having an expert “friend” enough? An analysis of consumer switching behavior in mobile telephony," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 359-372.
    11. Duxbury, Darren, 2012. "Sunk costs and sunk benefits: A re-examination of re-investment decisions," The British Accounting Review, Elsevier, vol. 44(3), pages 144-156.
    12. Englmaier, Florian & Schmöller, Arno, 2010. "Determinants and Effects of Reserve Prices in Hattrick Auctions," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 326, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    14. Bernadette Kamleitner & Erich Kirchler, 2006. "Personal loan users’ mental integration of payment and consumption," Marketing Letters, Springer, vol. 17(4), pages 281-294, December.
    15. Valeria Di Cosmo & Elisa Trujillo-Baute, 2018. "From Forward to Spot Prices: Producers, Retailers and Loss Averse Consumers in Electricity Markets," Working Papers 2018.31, Fondazione Eni Enrico Mattei.
    16. Cheng, Andong & Baskin, Ernest, 2021. "Disproportionate redemption discounting: Mental accounting of discounted credit," Journal of Business Research, Elsevier, vol. 128(C), pages 156-163.
    17. Itai Ater & Vardit Landsman, 2013. "Do Customers Learn from Experience? Evidence from Retail Banking," Management Science, INFORMS, vol. 59(9), pages 2019-2035, September.
    18. Shi, Haijiao & Chen, Rong & Xu, Xiaobing, 2021. "How reward uncertainty influences subsequent donations: The role of mental accounting," Journal of Business Research, Elsevier, vol. 132(C), pages 383-391.
    19. Chu, Hsunchi & Liao, Shuling, 2010. "Buying while expecting to sell: The economic psychology of online resale," Journal of Business Research, Elsevier, vol. 63(9-10), pages 1073-1078, September.
    20. Eduard Marinov, 2017. "The 2017 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 117-159.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:190:y:2024:i:c:s0965856424002957. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.