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On the optimal fare policies in urban transportation

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  • Pedersen, Pål Andreas

Abstract

This paper focuses on welfare optimal transport policies in a public transport market where positive externalities from the route supplier to the travellers as well as negative externalities within group of consumers exist. Additionally, there might be capacity constraints of two types. Firstly, the actual numbers of travellers in a period cannot be above the actual seat capacity supplied by the operator. Secondly, the number of seats supplied by the operator cannot exceed the maximum seat capacity given by the fleet of vehicles the operator controls in the period. Among other things, the paper shows that in the case where there is excess seat and route capacity, the fares should be equal to sum of the short run marginal operational costs and the costs an additional passenger is causing on the other travellers. In the long run, however, fares should be equal to sum of the long run marginal operational costs and the costs an additional passenger is causing on other travellers minus the gain in reduced time costs for all of the passengers that the final unit of supply brings.

Suggested Citation

  • Pedersen, Pål Andreas, 2003. "On the optimal fare policies in urban transportation," Transportation Research Part B: Methodological, Elsevier, vol. 37(5), pages 423-435, June.
    • Handle: RePEc:eee:transb:v:37:y:2003:i:5:p:423-435
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    1. Jørgensen, Finn & Pedersen, Hassa & Solvoll, Gisle, 2004. "Ramsey pricing in practice: the case of the Norwegian ferries," Transport Policy, Elsevier, vol. 11(3), pages 205-214, July.
    2. Lu, Xiao-Shan & Liu, Tian-Liang & Huang, Hai-Jun, 2015. "Pricing and mode choice based on nested logit model with trip-chain costs," Transport Policy, Elsevier, vol. 44(C), pages 76-88.
    3. Yoh, Allison & Taylor, Brian D. & Gahbauer, John, 2012. "Does Transit Mean Business? Reconciling academic, organizational, and political perspectives on Reforming Transit Fare Policies," University of California Transportation Center, Working Papers qt6dv295b7, University of California Transportation Center.
    4. Tirachini, Alejandro & Hensher, David A., 2011. "Bus congestion, optimal infrastructure investment and the choice of a fare collection system in dedicated bus corridors," Transportation Research Part B: Methodological, Elsevier, vol. 45(5), pages 828-844, June.
    5. Ljungberg, Anders, 2010. "Local public transport on the basis of social economic criteria," Research in Transportation Economics, Elsevier, vol. 29(1), pages 339-345.
    6. Zhang, Junlin & Lindsey, Robin & Yang, Hai, 2018. "Public transit service frequency and fares with heterogeneous users under monopoly and alternative regulatory policies," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 190-208.
    7. Albalate, Daniel & Bel, Germà, 2010. "What shapes local public transportation in Europe? Economics, mobility, institutions, and geography," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(5), pages 775-790, September.
    8. Jørgensen, Finn & Pedersen, Pål Andreas, 2004. "Travel distance and optimal transport policy," Transportation Research Part B: Methodological, Elsevier, vol. 38(5), pages 415-430, June.
    9. Jin, Zhihua & Schmöcker, Jan-Dirk & Maadi, Saeed, 2019. "On the interaction between public transport demand, service quality and fare for social welfare optimisation," Research in Transportation Economics, Elsevier, vol. 76(C).

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