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.