Policy analysis of third party electronic coupons for public transit fares

Mobile technologies are generating new business models for urban transport systems, as is evident from recent startups cropping up from the private sector. Public transport systems can make more use of mobile technologies than just for measuring system performance, improving boarding times, or for analyzing travel patterns. A new transaction model is proposed for public transport systems where travelers are allowed to pre-book their fares and trade that demand information to private firms. In this public-private partnership model, fare revenue management is outsourced to third party private firms such as big box retail or large planned events (such as sports stadiums and theme parks), who can issue electronic coupons to travelers to subsidize their fares. This e-coupon pricing model is analyzed using marginal cost theory for the transit service and shown to be quite effective for monopolistic coupon rights, particularly for demand responsive transit systems that feature high cost fares, non-commute travel purposes, and a closed access system with existing pre-booking requirements. However, oligopolistic scenarios analyzed using game theory and network economics suggest that public transport agencies need to take extreme care in planning and implementing such a policy. Otherwise, they risk pushing an equivalent tax on private firms or disrupting the urban economy and real estate values while increasing ridership.     

Transport system management in San Francisco: an assessment

The paper reports the results of a transportation corridor study. The emphasis in the study is in transportation system management (TSM) policies although some capital intensive alternatives are also considered.

The results suggest that currently popular TSM policies in U.S.A., even when augmented with capital intensive changes, have only marginal impacts on modal choices. These currently popular policies, high occupancy vehicle priority lanes, improved bus and express bus service, increased feeder bus service and so forth, appear to confer benefits to well to do suburbanites but do not improve the transportation of urban dwellers.

Another interesting result is that if user costs were increased to cover the full costs of transportation the transit fares for low income people would increase ten percent and the increase for urban dwellers would be about 20 percent. Interestingly, there would be no change in bus fares for either group. However, for high income travellers and suburbanites the increase in transit fares would be in excess of 100 percent. Thus, the current fare structure is inequitable making the low income people and the urban dwellers to pay a much larger share of their transportation cost than the often well to do suburbanites.     

Assessing social equity in distance based transit fares using a model of travel behavior

The goal of this study is to develop and apply a new method for assessing social equity impacts of distance-based public transit fares. Shifting to a distance-based fare structure can disproportionately favor or penalize different subgroups of a population based on variations in settlement patterns, travel needs, and most importantly, transit use. According to federal law, such disparities must be evaluated by the transit agency, but the area-based techniques identified by the Federal Transit Authority for assessing discrimination fail to account for disparities in distances travelled by transit users. This means that transit agencies currently lack guidelines for assessing the social equity impacts of replacing flat fare with distance-based fare structures. Our solution is to incorporate a joint ordinal/continuous model of trip generation and distance travelled into a GIS Decision Support System. The system enables a transit planner to visualize and compare distance travelled and transit-cost maps for different population profiles and fare structures. We apply the method to a case study in the Wasatch Front, Utah, where the Utah Transit Authority is exploring a switch to a distance-based fare structure. The analysis reveals that overall distance-based fares benefit low-income, elderly, and non-white populations. However, the effect is geographically uneven, and may be negative for members of these groups living on the urban fringe.     

Flat versus differentiated transit pricing: What's a fair fare?

Virtually every U.S. bus system today charges its customers flat fares. Recent trends, however, suggest that passengers are traveling farther and proportionally more during peak hours, factors which have contributed toward transit's cost spiral. As deficits continue to soar and available funding tightens, current pricing rationales must be seriously questioned. This paper assesses the efficiency and equity impacts of three California transit agencies' fare structures. Short-distance, off-peak patrons are found to heavily cross-subsidize long-haul commuters. Fares differentiated by distance and time-of-day, in contrast, could improve the transit industry's fiscal posture while eliminating differences in payment rates. Barriers to their implementation remain formidable, however, both in terms of current fare collection capabilities and political acceptability.     

Transit pricing research

Several decades of research on transit pricing have provided clear insights into how riders respond to price changes in both the transit and automobile sectors. For the most part, riders are insensitive to changes in either fare levels, structures, or forms of payments, though this varies considerably among user groups and operating environments. Since riders are approximately twice as sensitive to changes in travel time as they are to changes in fares, a compelling argument can be made for operating more premium quality transit services at higher prices. Such programs could be supplemented by vouchers and concessionary programs to reduce the burden of higher fares on low-income users. Also, cross-elasticity research suggests that higher automobile prices would have a significantly greater affect on ridership than lower fares. Most research on transit fare structures shows that the common practice of flat fares is highly inequitable, penalizing short-distance and off-peak users. Free fare programs have proven quite costly for each new transit user attracted and have rarely lured motorists to transit. Free fares limited to downtowns have been more successful than systemwide free fare programs. While prepayment schemes have met with success in the U.S. and Europe, honor fares have suffered from excessive revenue losses in at least one case in the U.S. Some of the more noteworthy fare policy successes in North America have been Bridgeport's combined pass-fare program, Allentown's deep discounts, Ottawa's major fare reduction and differentiation, and Columbus's substantial midday discount. As paratransit and other new transit alternatives to conventional bus continue to emerge, new, more differentiated fare practices can be expected in the future.     

The dynamics of fare and frequency choice in urban transit

This paper investigates the choice of fare and service frequency by urban mass transit agencies. A more frequent service is costly to provide but is valued by riders due to shorter waiting times at stops, and faster operating speeds on less crowding vehicles. Empirical analyses in the 1980s found that service frequencies were too high in most of the cities studied. For a given budget constraint, social welfare could be improved by reducing service frequencies and using the money saved to lower fares. The cross-sectional nature of these analyses meant that researchers were unable to address the question of when the oversupply occurred. This paper seeks to answer that question by conducting a time-series analysis of the bus operations of the Chicago Transit Authority from 1953 to 2005. The paper finds that it has always been the case that too much service frequency was provided at too high a fare. The imbalance between fares and service frequency became larger in the 1970s when the introduction of operating subsidies coincided with an increase in the unit cost of service provision.     

Time‐of‐day transit pricing: comparative US and international experiences

Experiences with time‐of‐day transit pricing in the U.S. are reviewed in this article and compared to those in other countries. Emphasis is placed on examining ridership, financial and efficiency impacts associated with time‐of‐day pricing, along with highlighting innovative approaches to implementing fare differentials. American time‐of‐day fare structures have been about evenly split between off‐peak discounts, peak‐period surcharges, and programmes involving differential rates of fare increases between peak and off‐peak hours. Although most American operators introduced time‐of‐day differentials to encourage ridership shifts to the off‐peak period, available evidence suggests that they have been only marginally successful in doing so. Off‐peak users were generally found to be far more fare‐sensitive to discounts than peak passengers were to surcharges. Only in a handful of American cities were significant efficiency and financial benefits from time‐of‐day pricing recorded, though in those few places, they tended to be substantial. The most successful American programmes have been those which collect fares on the basis of bus runs and direction of trips (rather than the exact time) and which aggressively market their programmes under the aegis of ‘bargain fares’. It is concluded that useful lessons can be gained by sharing policy insights from experiments with differential transit pricing in both the US and elsewhere.     

Improvements and rationalizations of bus service in rural areas of Denmark

This paper presents an empirical investigation of the effects of marginal changes in public bus transport in rural areas. It is based on a larger study of bus services in rural areas of Denmark (Hansen, 1986). At the beginning of the 1980s, politicians suddenly demanded reductions in public expenditures. Therefore, the Regional Transportation Corporations reduced services and increased fares. However, this article shows that it is possible to meet the demand for reduced subsidy and the passengers' wishes for better service simultaneously. Where the empirical investigations show fare elasticities of about -0.2, the service elasticities seem to be numerically above 1. In the last part of the paper these findings are applied to an alternative saving policy.     

Transit passenger response: Short and long term elasticities using time series analysis

This paper investigates the effects of price and service changes on transit ridership. The concept of elasticity is introduced and the traditional methods for estimating elasticities are discussed. In this paper an extra dimension is added by investigating short and long term elasticities. Time series analysis, developed by Box and Jenkins is chosen for the analysis. The Box and Jenkins methodology is applied to a monthly time series of average weekday ridership on the Chicago Transit Authority (CTA) rail system. Four categories of explanatory variables are investigated: fare on the CTA rail system, service provided on the CTA rail system, cost of car trips and weather effects. The effects of gas prices and rail service were found to be significant; however the results indicate a twelve month delay before service changes influence ridership. The effect of transit fares was found to be insignificant, indicating that both the short and long term fare elasticities are zero.     

Consequences of service reduction in municipal transit: San Francisco’s muni

Urban transit in the United States is going through a crisis of rising costs, increasing fares, falling patronage, and concomitant service reductions; typical of the pattern is San Francisco’s Municipal Railway, the agency in charge of all the City’s transit. From a basic fare of 15c in 1969, two increases brought the fare to 25c by 1972, and cut sharply into a previously stable patronage. The “Muni”, in an effort to reduce costs and meet its budgeted deficit, attempted to reduce service by ten to fifteen percent. From an analysis of the data which could be obtained, it appears that neither efficiency not equity in the City would have been served by the proposed cutbacks. The analysis draws from a variety of sources and methods in exploring the interactions within the transportation system and within the city budget.     

Transit competitiveness in polycentric metropolitan regions

This paper analyzes the potential to, and impacts of, increasing transit modal split in a polycentric metropolitan area – the Philadelphia, Pennsylvania region. Potential transit riders are preselected as those travelers whose trips begin and end in areas with transit-supportive land uses, defined as “activity centers,” areas of high-density employment and trip attraction. A multimodal traffic assignment model is developed and solved to quantify the generalized cost of travel by transit services and private automobile under (user) equilibrium conditions. The model predicts transit modal split by identifying the origin–destination pairs for which transit offers lower generalized cost. For those origin–destination pairs for which transit does not offer the lowest generalized cost, I compute a transit competitiveness measure, the ratio of transit generalized cost to auto generalized cost. The model is first formulated and solved for existing transit service and regional pricing schemes. Next, various transit incentives (travel time or fare reductions, increased service) and auto disincentives (higher out of pocket expenses) are proposed and their impacts on individual travel choices and system performance are quantified. The results suggest that a coordinated policy of improved transit service and some auto disincentives is necessary to achieve greater modal split and improved system efficiency in the region. Further, the research finds that two levels of coordinated transit service, between and within activity centers, are necessary to realize the greatest improvements in system performance.     

Elasticities for taxicab fares and service availability

This study utilizes a unique dataset from New York City to examine the effects of taxi fare increases on trip demand and the availability of taxi service. The elasticity of trip demand with respect to fares is estimated to be –0.22; the elasticity of service availability with respect to the taxi fare is 0.28; and the elasticity of service availability with respect to total supply of service is near 1.0. These results have important implications for taxi regulatory decisions. First, fare increases do substantially increase industry revenues but at a lesser rate than the percentage increase in the fare. The implication for policy-makers is that fare elasticities must be carefully considered to obtain desired improvements in drivers' earnings. Second, service availability -- an important aspect of service quality that is generally overlooked during fare policy debates -- should be a central consideration in fare setting, given the considerable impact of fares on availability. Finally, where the supply of cabs needs to be expanded, the number of cabs can be significantly increased without harming the revenue stream of existing operators. This finding alleviates a major industry objection to issuing additional taxicab licenses.     

Normative framework for transit fare policy-making

This paper presents a normative model for transit fare policy-making. Key elements of the model are: establishing service policy and ridership objectives, developing an overall financial philosophy, making fare level decisions, making structural pricing decisions, and designing implementation strategies. In general, the overall objectives of a transit agency regarding service quality and ridership levels should be the main impetus behind any fare program. Identifying where transit lies on the continuum of being a public versus a private service should frame the overall financial philosophy of a transit agency. From this the specification of farebox recovery targets should follow. Deciding upon structural aspects of a fare program perhaps represents one of the most important and most frequently overlooked steps of the process. Specific cost-based and value-based fare strategies should be considered. Implementation involves making the adopted fare strategy work. Key implementation issues are: fare payment and collection techniques, necessary service changes, marketing and promotional programs, and consensus-building. The model presented calls for feedback among these steps to allow an iterative, yet comprehensive, approach to fare policy-setting.     

Optimization of Fare Structure and Service Frequency for Maximum Profitability of Transit Systems

Abstract

Providing efficient public transportation has been recognized as a potential way of alleviating congestion, improving mobility, mitigating air pollution, and reducing energy consumption. Many people use public transportation systems for their daily commute, while others use different transportation modes (e.g. cars, taxis, carpools, etc.). Inexpensive fares with good transit service encourages ridership, and the resulting revenue may be used to provide better service. Optimization of transit service frequency and its associated fare structure is desirable in order to increase revenue at reasonable transit operating expenditure. The objective of the study reported here is to maximize profit subject to service capacity constraint, while elastic demand is considered. The solution methodology is developed and applied to solve the profit maximization problem in a case study based on Newark, NJ, USA. Numerical results, including optimal solutions and sensitivity analyses, are presented. It is found that an optimal temporal headway and differential fare structure that maximizes total profit for the studied subway system can be efficiently solved.     

Transit subsidies and regulation: Lessons from the Israeli experience

The Israeli transport sector, like those of many other countries is subject to complete government control with regard to fares, entry into the market, terms of operation and subsidies. It is unique, however, in that the fares charged are remarkably low and that the major transit mode, buses, is operated by privately owned companies. This paper explores what makes this low level of fares possible and in doing so examines the principal characteristics of the sector. It shows that this phenomenon cannot be explained by the amount of subsidy given to the operators but must be attributed to other factors, mainly the efficiency in the production of the services which is motivated by the profit maximization objective of the operators. The paper further argues that government policies regarding subsidy and regulation are generally inefficient as they cause misallocation of resources.     

Nature and/or nurture? Analyzing the determinants of transit ridership across US urbanized areas

Public subsidy of transit services has increased dramatically in recent years, with little effect on overall ridership. Quite obviously, a clear understanding of the factors influencing transit ridership is central to decisions on investments in and the pricing and deployment of transit services. Yet the literature about the causes of transit use is quite spotty; most previous aggregate analyses of transit ridership have examined just one or a few systems, have not included many of the external, control variables thought to influence transit use, and have not addressed the simultaneous relationship between transit service supply and consumption. This study addresses each of these shortcomings by (1) conducting a cross-sectional analysis of transit use in 265 US urbanized areas, (2) testing dozens of variables measuring regional geography, metropolitan economy, population characteristics, auto/highway system characteristics, and transit system characteristics, and (3) constructing two-stage simultaneous equation regression models to account for simultaneity between transit service supply and consumption. We find that most of the variation in transit ridership among urbanized areas – in both absolute and relative terms – can be explained by factors outside of the control of public transit systems: (1) regional geography (specifically, area of urbanization, population, population density, and regional location in the US), (2) metropolitan economy (specifically, personal/household income), (3) population characteristics (specifically, the percent college students, recent immigrants, and Democratic voters in the population), and (4) auto/highway system characteristics (specifically, the percent carless households and non-transit/non-SOV trips, including commuting via carpools, walking, biking, etc.). While these external factors clearly go a long way toward determining the overall level of transit use in an urbanized area, we find that transit policies do make a significant difference. The observed range in both fares and service frequency in our sample could account for at least a doubling (or halving) of transit use in a given urbanized area. Controlling for the fact that public transit use is strongly correlated with urbanized area size, about 26% of the observed variance in per capita transit patronage across US urbanized areas is explained in the models presented here by service frequency and fare levels. The observed influence of these two factors is consistent with both the literature and intuition: frequent service draws passengers, and high fares drive them away.     

Distribution of the transit tax burden in five U.S. metropolitan areas

As transit subsidies increased twelve-fold in the United States between 1970 and 1980, metropolitan areas responded in very different ways to the challenge of financing burgeoning transit costs. The variety of approaches to transit finance has led to variation in the income-redistributive impacts of taxation. This paper reports on the results of disaggregate analysis of transit tax incidence in Chicago, Portland, northern New Jersey, San Antonio, and Phoenix. In cases where alternative tax shifting assumptions can be made, a range of tax burden distributions is calculated. Causes of the variation in redistributive impact are discussed. The analysis concludes by comparing the regressivity of financing transit through higher fares with the regressivity of taxes needed to support subsidies.     

The cost of equity: Assessing transit accessibility and social disparity using total travel cost

Social equity is increasingly incorporated as a long-term objective into urban transportation plans. Researchers use accessibility measures to assess equity issues, such as determining the amount of jobs reachable by marginalized groups within a defined travel time threshold and compare these measures across socioeconomic categories. However, allocating public transit resources in an equitable manner is not only related to travel time, but also related to the out-of-pocket cost of transit, which can represent a major barrier to accessibility for many disadvantaged groups. Therefore, this research proposes a set of new accessibility measures that incorporates both travel time and transit fares. It then applies those measures to determine whether people residing in socially disadvantaged neighborhoods in Montreal, Canada experience the same levels of transit accessibility as those living in other neighborhoods. Results are presented in terms of regional accessibility and trends by social indicator decile. Travel time accessibility measures estimate a higher number of jobs that can be reached compared to combined travel time and cost measures. However, the degree and impact of these measures varies across the social deciles. Compared to other groups in the region, residents of socially disadvantaged areas have more equitable accessibility to jobs using transit; this is reflected in smaller decreases in accessibility when fare costs are included. Generating new measures of accessibility combining travel time and transit fares provides more accurate measures that can be easily communicated by transportation planners and engineers to policy makers and the public since it translates accessibility measures to a dollar value.     

Does the increase of public transit fares deteriorate air quality in Beijing?

Since 2006, Beijing lowered its public transit fares as a way to improve air quality. However, Beijing increased public transportation fare prices from December 28, 2014, and commuters pay for the distance they traveled rather than a flat fare. This paper explores the effect of Beijing public transit fares increase on air quality. We collect daily data of air pollution and weather variables and use synthetic control method of Abadie and Gardeazabal (2003) to select control units. We then estimate a difference-in-differences model and assess the effect of the policy on air quality index (AQI). We find a 16.28% increase in air pollution in short run. However, we find no longer-run effect on air quality.