Transcript Presentation

Efficient pricing of urban
public transport with budget
constraints
Nils Fearnley
Institute of Transport Economics, Oslo
E-mail: [email protected]
1
100 %
75 %
Ticket revenues
50 %
25 %
Subsidies
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
0%
1986
Operating revenue/cost
Financing public transport in
Norwegian city Trondheim
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Efficient pricing with budget
constraint
• MC pricing not possible
 Deficit
• Yield management
 Max profit
• Ramsey-prising
 Minimise welfare loss caused by budget
constraint
Price differentiation 
3
Quality and quantity differentiation
• Quantity:
– Number of trips: multi-journey coupons, group
tickets, family tickets etc
– Distance: Zone systems, city centre ticket
• Quality: Passengers’ WTP vary with i.a.:
–
–
–
–
–
Means of public transport
Travel time
Departure time
Interchanges
Etc
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Differentiation of demand segments
• OAP, student, family, military etc
• Niche markets
• Requires indisputable segmentation of
passengers
• Pricing must reflect segment’s price
elasticity/WTP
5
Differentiation – disadvantages?
• Rebates and surcharges: unfair?
• Too complex fare structure?
 Trade off between simple and “fair” systems and
efficient cost recovery
 Create goodwill with attractive rebates
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Patronage growth opportunities
Elastic demand:
• Short and long trips
• Leisure and off peak
• Long term
• Rail
Combine peak surcharges and off peak rebates
to maintain revenue
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Is efficient pricing possible?
• Rigid fare scales and political opposition?
• Problems related to integrated fares between
cities, transport modes, operators?
• Practical implementation?
Some examples 
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Time differentiation
• Sweden:
Stockholm: Wild card, Monthly weekend card
Gothenburg: Peak/off-peak season tickets
• England:
Off-peak saver tickets in most of England
• US:
Rebated off-peak day and season tickets
9
Surcharge on higher standard modes
Oslo airport access:
150
100
50
0
Airport
express
Airport
buses
Ordinary
trains
10
Surcharge on other quality
Aircondition: Singapore
Express bus: US
3
2,0
0,5
1
0,0
Non-a/c
a/c
0
Express
a/cYork
New
Express
1,0
Ordinary
2
Ordinary
Express
1,5
Washington
11
2
1
0
Oslo
From driver
Pre-sold
3
From driver
€
Pre-sold
Rebated presale
4
Helsinki
12
Hong Kong
• No season tickets!
Campaigns:
• Go via selected metro stations and have HK$2 paid
back to you Octopus card
• Make 10 trips within a week and get one trip free
• Rebates if you start your journey before the
morning peak
Souvenir tickets 
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Summary
• Low subsidies necessitate price
differentiation to maintain service levels
• General fare increases are not efficient and
cause unnecessary passenger loss
• Efficient cost recovery: Fares reflect MC and
WTP/elasticities (=Ramsey pricing)
• It is possible! But need to know market and
costs
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