Flat versus differentiated transit pricing: What's a fair fare?

Abstract

Virtually every U.S. bus system today charges its customers flat fares. Recent trends, however, suggest that passengers are traveling farther and proportionally more during peak hours, factors which have contributed toward transit's cost spiral. As deficits continue to soar and available funding tightens, current pricing rationales must be seriously questioned. This paper assesses the efficiency and equity impacts of three California transit agencies' fare structures. Short-distance, off-peak patrons are found to heavily crosssubsidize long-haul commuters. Fares differentiated by distance and time-of-day, in contrast, could improve the transit industry's fiscal posture while eliminating differences in payment rates. Barriers to their implementation remain formidable, however, both in terms of current fare collection capabilities and political acceptability.

Optimisation of transit fares: a multimodal approach based on system and external costs

“…In the literature, several methods have been proposed; they are based on distances (Cervero [15]; Daskin et al [16]), time intervals (Cervero [17]) or average travel times (Phillips and Sanders [18]). However, three main methods of fare zoning can be identified ( fig.…”

Evaluation of Horizontal Equity under a Distance-Based Transit Fare Structure

“…As a seminal study in the second group, Cervero (1981Cervero ( , 1990 and Cervero et al (1980) evaluated the efficiency and equity implications of alternative transit fare structures. They define pricing structures as being efficient when users contributed to the costs of their services in line with the benefits they receive, as reflected by the marginal costs of their trips.…”

“…The horizontal dashed line shows the perfect status for equity, the "subsidy threshold" (Cervero 1981). This threshold shows the situation in which every group of passenges compensates for the charges they incur to the system.…”

The Impact of Beijing Subway’s New Fare Policy on Riders’ Attitude, Travel Pattern and Demand

“…The reason is that lower income riders and younger users more frequently rely on the public transportation services than the higher income riders and elder users. Based on travel pattern analyses, lower income riders are found to travel shorter distances and more often during non-rush hours, and thus poor users are actually subsidizing rich ones [41]. Often, a long term of flat fare policy may directly contribute to the financial deterioration and, consequently, increase fares due to budget shortfalls.…”

“…In terms of distance-based fares, the distance-based fares generally benefit low-income and elderly riders [42], and the fares differentiated by distance could reduce inequities and improve transits' financial performance [41]. However, simply increasing transportation price is often criticized as being regressive (burdening disadvantaged people) [38].…”