Public Transport Pricing Schemes

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Public Transport Pricing Schemes

• Richard Smith

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Objectives for Public Transport Fares in the Real
World?

• maximising use
• recovering costs (total not marginal)
• minimising objections
• linking to inflation
• avoiding change, retaining options
• perceived justice?
• social objectives
• economic objectives
• profit maximisation in many sectors

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Fares - Some of the Options - 1

• The Tickets geography
• distance based
• zonal structures
• some fine, some very coarse
• flat fares
• often over extensive areas

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Fares - Some of the Options - 2

• The Tickets Validity
• period or pass tickets
• unrelated to level of use
• all trips free after ticket purchase
• time based - off-peak, early bird, etc
• market or niche products
• elderly, children, student, etc
• integrated
• trip or period based
• regarding extra modes as a free bonus

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Fares - The Influences

• budget constraints
• and desire to fund improvements
• short(ish)-term political priorities
• a perception of equity
• some understanding of elasticities
• but little of cross-elasticities
• little perception of (or interest in?) effects on
  costs - total or marginal

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Fares - the Complications - 1

• Marketing v Pricing
• cost related fares not demand maximising?
• complication of finely targeted fares
• simple fares demonstrably successful
• Different fares structures affect costs
• Social priorities often addressed through fares
  discounts
• person or system based

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Fares - the Complications - 2

• Systems often in private sector
• often local monopoly
• controlled by fares regulation
• New investment needs
• general financial demands
• Private Finance implications
• Impacts often outside direct area of concern
• wider transport effects
• land-use impacts

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Fares - the Omissions

• Assumption that increased use always good - but
  not fully tested
• Lack of integration of pricing decisions
• public transport, highway, fuel tax, etc
• and lack of access to subsidy
• Services often regarded as fixed
• cant be cut, but increases unavoidable
• Land-use and social benefits poorly quantified
  - but strong influence

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Fares - the Opportunities

• Better understanding
• of impacts and options
• New technology
• Smartcards particularly
• Better integration of decisions
• over traffic and public transport
• with land-use planning
• of financial frameworks

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Best Practice
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Quite Good Practice - 1

• Many cities understand markets well
• with successful demand increasing fares policies
• targeting fares to maximise use
• generally with simple fares
• particularly to attract car users
• attempt to incorporate externalities
• believe priority must be road user charging
• but do not have the tools or the backing
• depend on crude road-space allocation
• Smartcards are prompting radical re-think
• but targeting markets, not balancing marginal
  impacts

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Quite Good Practice - 2

• Smartcards are prompting radical re-think
• offering scope for fares more closely linked to
  (changing) marginal costs
• but in practice
• targeting markets, not balancing marginal impacts
• creating more integrated products

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Fares - the Help Needed - 1

• More research
• particularly to quantify the benefits
• to provide predictive/modeling tools
• understand interactions
• integrating wider factors
• understand second best options
• clarity on pace and priorities

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Fares - the Help Needed - 2

• Standardisation
• reducing cost of options
• increasing acceptability/understanding
• Promotion, promotion and more promotion

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Fares - the Decision Maker

• Decision-makers will only buy-in
• with clarity on political as well as economic
  benefits
• financial frameworks that tackle cross subsidy
  and potential private sector conflicts
• and integration of the very real impacts not
  captured in marginal cost pricing