MARGINAL COST PRICING OF SCHEDULED TRANSPORT SERVICES

The article demonstrates the direct use of a demand function in a marginal cost pricing scheme for scheduled passenger transport. The basis of the development and generalisation by Jansson of the theory of optimal bus fares, set forth by Turvey and Mohring, is that the total transport cost, on which marginal cost is calculated, should include users' cost as well as producers' cost. Marginal cost pricing will then usually imply that fares will be set below producers marginal cost. As a consequence, the producers' of scheduled passenger transport will run at a financial deficit if they adhere to that pricing policy resulting in a public subsidy being needed to cover losses. By working directly from a demand function and a producers' cost function, it may be possible to evaluate more clearly the marginal cost pricing of scheduled transport services.

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Filing Info

  • Accession Number: 00381444
  • Record Type: Publication
  • Source Agency: Transport Research Laboratory
  • Files: ITRD, TRIS
  • Created Date: Feb 29 1984 12:00AM