01594779

Component

Travel passes are widely used in urban transit networks by frequent travelers who thus face zero marginal fare after an initial entry payment. The operator's benefit from travel pass sales is increased revenues, given that the combination of passes and single tickets allows second degree price discrimination based on the intensity of transit usage. This paper sheds light on a less advantageous property of travel passes in the presence of crowding discomfort externalities: zero marginal fare with non-zero marginal external cost lead to inevitable overconsumption. The authors derive from a microeconomic model and a numerical simulation that in crowding the revenue generating power of travel passes diminishes. Under severe capacity constraints the availability of travel passes may reduce social welfare and harm profits as well; the authors reach this general conclusion without restrictive assumptions on optimal economic behavior in price setting.

This paper was sponsored by TRB committee ABE20 Standing Committee on Transportation Economics.

01584066

16-3365

English

17p

2016

Transportation Research Board 95th Annual Meeting

Web

Figures; References (15)

Crowds; Economic models; Fares; Pricing; Public transit; Transit passes; Urban areas

Economics; Passenger Transportation; Public Transportation

Transportation Research Board Annual Meeting 2016 Paper #16-3365

TRIS, TRB, ATRI

Jan 12 2016 5:28PM