IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v94y2016icp470-482.html
   My bibliography  Save this article

Optimal pricing for travelcards under income and car ownership inequities

Author

Listed:
  • Jara-Díaz, Sergio
  • Cruz, Diego
  • Casanova, César

Abstract

Travelcards are used in many parts of the developed world as a form of payment for public transport that is convenient for frequent users. In essence it involves a one-time payment T at the beginning of a period that covers all trips within that period. Carbajo (1988) applies the two-part tariff approach to find the optimal (welfare maximizing) value for T assuming a nil effect of T on the demand schedule of each and every individual (no income effect). Here we deal with an urban area where individual trips increase with income, but where car ownership – correlated with income – makes the public transport share diminish towards high income segments. A theoretical model is developed to find the optimal values (maximum social welfare with a budget constraint) for T and, simultaneously, for a single ticket P, considering the effect of T on available income as well as differences across individuals regarding car ownership. The model is applied using parameters associated with monthly travel in Santiago, Chile, where both income and car ownership are highly concentrated and correlated, and where travelcards do not exist. We obtain that the two richest segments choose to pay for the single ticket and the other eight choose to buy the travelcard, increasing equity. Sensitivity analysis regarding public transport quality, increased car ownership and poverty reduction show relatively marginal changes regarding optimal prices and preferred form of payment.

Suggested Citation

  • Jara-Díaz, Sergio & Cruz, Diego & Casanova, César, 2016. "Optimal pricing for travelcards under income and car ownership inequities," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 470-482.
    • Handle: RePEc:eee:transa:v:94:y:2016:i:c:p:470-482
    DOI: 10.1016/j.tra.2016.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856415303116
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tra.2016.10.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Brown,Stephen J. & Sibley,David Sumner, 1986. "The Theory of Public Utility Pricing," Cambridge Books, Cambridge University Press, number 9780521314008.
    2. Martin S. Feldstein, 1972. "Equity and Efficiency in Public Sector Pricing: The Optimal Two-Part Tariff," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(2), pages 175-187.
    3. Walter Y. Oi, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(1), pages 77-96.
    4. Daniel Van Vuuren & Piet Rietveld, 2002. "The Off-peak Demand for Train Kilometres and Train Tickets: A Microeconometric Analysis," Journal of Transport Economics and Policy, University of Bath, vol. 36(1), pages 49-72, January.
    5. FitzRoy, Felix & Smith, Ian, 1999. "Season Tickets and the Demand for Public Transport," Kyklos, Wiley Blackwell, vol. 52(2), pages 219-238.
    6. Felix FitzRoy & Ian Smith, 1999. "Season Tickets and the Demand for Public Transport," Kyklos, Wiley Blackwell, vol. 52(2), pages 219-238, May.
    7. FitzRoy, Felix & Smith, Ian, 1998. "Public transport demand in Freiburg: why did patronage double in a decade?," Transport Policy, Elsevier, vol. 5(3), pages 163-173, June.
    8. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Börjesson, Maria & Eliasson, Jonas & Rubensson, Isak, 2020. "Distributional effects of public transport subsidies," Journal of Transport Geography, Elsevier, vol. 84(C).
    2. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    3. Anders Bondemark & Henrik Andersson & Anders Wretstrand & Karin Brundell-Freij, 2021. "Is it expensive to be poor? Public transport in Sweden," Transportation, Springer, vol. 48(5), pages 2709-2734, October.
    4. Hörcher, Daniel & Graham, Daniel J., 2020. "MaaS economics: Should we fight car ownership with subscriptions to alternative modes?," Economics of Transportation, Elsevier, vol. 22(C).
    5. Bull, Owen & Muñoz, Juan Carlos & Silva, Hugo E., 2021. "The impact of fare-free public transport on travel behavior: Evidence from a randomized controlled trial," Regional Science and Urban Economics, Elsevier, vol. 86(C).
    6. Fielbaum, Andrés & Jara-Diaz, Sergio, 2021. "Assessment of the socio-spatial effects of urban transport investment using Google Maps API," Journal of Transport Geography, Elsevier, vol. 91(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    2. Redman, Lauren & Friman, Margareta & Gärling, Tommy & Hartig, Terry, 2013. "Quality attributes of public transport that attract car users: A research review," Transport Policy, Elsevier, vol. 25(C), pages 119-127.
    3. H. Schmale & T. Ehrmann & A. Dilger, 2013. "Buying without using -- biases of German BahnCard buyers," Applied Economics, Taylor & Francis Journals, vol. 45(7), pages 933-941, March.
    4. Voss, Achim, 2015. "Collective public-transport tickets and anticipated majority choice: A model of student tickets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 80(C), pages 263-276.
    5. María Angeles García Valiñas, 2004. "Eficiencia y equidad en el diseño de precios óptimos para bienes y servicios públicos," Hacienda Pública Española / Review of Public Economics, IEF, vol. 168(1), pages 95-119, march.
    6. Sharaby, Nir & Shiftan, Yoram, 2012. "The impact of fare integration on travel behavior and transit ridership," Transport Policy, Elsevier, vol. 21(C), pages 63-70.
    7. Rahman, Moshiur & Yasmin, Shamsunnahar & Eluru, Naveen, 2019. "Controlling for endogeneity between bus headway and bus ridership: A case study of the Orlando region," Transport Policy, Elsevier, vol. 81(C), pages 208-219.
    8. Takahashi, Takaaki, 2017. "Economic analysis of tariff integration in public transport," Research in Transportation Economics, Elsevier, vol. 66(C), pages 26-35.
    9. Anna Matas, 2003. "Demand and revenue implications of an integrated public transport policy. The case of," Working Papers wpdea0304, Department of Applied Economics at Universitat Autonoma of Barcelona.
    10. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    11. Schlereth, Christian & Stepanchuk, Tanja & Skiera, Bernd, 2010. "Optimization and analysis of the profitability of tariff structures with two-part tariffs," European Journal of Operational Research, Elsevier, vol. 206(3), pages 691-701, November.
    12. Robert Albon, 1988. "The Welfare Costs of the Australian Telecommunications Pricing Structure," The Economic Record, The Economic Society of Australia, vol. 64(2), pages 102-112, June.
    13. Robert H. Patrick & Frank A. Wolak, 2001. "Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices," NBER Working Papers 8213, National Bureau of Economic Research, Inc.
    14. Hörcher, Daniel & Graham, Daniel J., 2020. "MaaS economics: Should we fight car ownership with subscriptions to alternative modes?," Economics of Transportation, Elsevier, vol. 22(C).
    15. K. Pushpangadan & G. Murugan, 1998. "Pricing with changing welfare criterion: An application of Ramsey-Wilson model to urban water supply," Centre for Development Studies, Trivendrum Working Papers 287, Centre for Development Studies, Trivendrum, India.
    16. Holmgren, Johan, 2007. "Meta-analysis of public transport demand," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(10), pages 1021-1035, December.
    17. Srzich, Antony, 2000. "The Effect of Income on Optimal Two Part Tariffs," Working Paper Series 3909, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    18. Carmona, Miguel, 2010. "The regulatory function in public-private partnerships for the provision of transport infrastructure," Research in Transportation Economics, Elsevier, vol. 30(1), pages 110-125.
    19. Alberto Cassone & Carla Marchese, 2005. "Welfare Effects of Price Integration in Local Public Transport," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 76(2), pages 257-274, June.
    20. Winston Chang & Lawrence Southwick, 1987. "On the pricing and benefit structure of a private club or public utility," Public Choice, Springer, vol. 55(3), pages 227-244, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:94:y:2016:i:c:p:470-482. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.