Making Pricing Work in Public Transport

It is not the operators of public transport who have to use resources to produce trips; the users themselves have a crucial input as well - their time. Users have to walk, wait, and travel inside the vehicle and, by doing so, they spend time, which is a resource consumed in the production of the trips. The microeconomic analysis of public transport must include this fact in order to find the optimal provision of services and the corresponding optimal prices. This is not new in transport analysis; car congestion pricing is the result of the inclusion of users’ travel time in the pricing analysis. It is based on the increasing relation between car users’ travel time and patronage after a certain demand level because of a negative externality in the use of road space. As a consequence, the price that induces the best possible use of road space is the difference between the value of the marginal time for all users and the value of the average travel time for each user. The objective of this chapter is to discuss the cost structure of public transport. Then, optimal fares and their financial results are examined. As the existence of scale economics is show to be crucial for the financial result of optimal fares, returns to scale are discussed in the fourth section. The fifth section presents a brief discussion about the impact of substitute modes and second best fares. In the sixth section the relation between optimal fare and distance is analyzes and the chapter closes with a summary and discussion.

  • Availability:
  • Authors:
    • Jara-Diaz, Sergio R
    • Gschwender, Antonio
  • Publication Date: 2005


  • English

Media Info

  • Media Type: Print
  • Features: Figures; References;
  • Pagination: pp 448-459
  • Monograph Title: Handbook of Transport Strategy, Policy and Institutions
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 01002563
  • Record Type: Publication
  • ISBN: 0080441157
  • Files: TRIS
  • Created Date: Jul 26 2005 1:00PM