Urban transit is in many ways in serious financial trouble, and its primary source of revenue--fares--is politically difficult to establish and change. In addition to raising funds, fares must often redistribute income, spur local development, and help reduce automobile use. This multipurpose situation is similar to the one that Boiteux handled in his examination of the publicly owned French electric utility industry. Bailey and Willig did similar analyses of long-distance telephone rates. The goal was to have prices that efficiently related to services' marginal costs and elasticities of demand, generated an acceptable level of profits (or deficits), and maximized the public's welfare from these services. The pricing analyses presented follow a similar approach; the Metropolitan Transportation Authority in New York City is used as the case study. Net benefit changes (revenues plus consumer surplus) were shown to be greater from efficiently set peak and off-peak fare differentials than for flat fares. These results were found to be fairly insensitive to changes in the fare elasticities of demand. In fact, the differential-fare approach looked best when the gap between peak and off-peak elasticities and marginal cost values was greatest. This was not an attempt to find the optimal or welfare-maximizing set of fares, but rather to show which transportation pricing options maximized public welfare within given budgetary constraints.

Media Info

  • Media Type: Print
  • Features: Figures; References; Tables;
  • Pagination: pp 23-30
  • Monograph Title: Economic and regulatory issues in intercity bus and other transportation
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00453094
  • Record Type: Publication
  • ISBN: 0309039010
  • Files: TRIS, TRB
  • Created Date: May 31 1986 12:00AM