Fare Aware

Note: This post is intended to get you and I thinking about transit fares and how changing them might affect a transit system. It steps a little bit into the absurd by exploring the extremes of different ideas, and is not indented as an educational post, but more as a “let’s do a thought experiment together” type post. I’d especially love to hear how these ideas made you feel, and the ideas you had about my ideas.

I’m going to wade into a topic that is often considered somewhat tangential for transit planners, but that transit users are constantly aware of (much like drivers are constantly aware of gas prices): the fare.

I say that fares are considered “tangential” to transit planners because they are often a natural result of having to deliver a certain service to a certain number of individuals in a certain way. If you’re willing to assume that planners have done their best to make a network as efficient as possible for everyone, then the fare is simply the cost of doing business over a certain period of time divided by the amount of people who will use the service in that period of time. Subsidies and other funding is incidental – that just decreases the amount of money that has to be made up of fares, but the number really just emerges from the system. Much like gas, it’s a market variable, and depends on the demand and supply of transit.

The “Fairest” Fare

If the goal here is to come up with a fare scheme that is considered the most “fair” to everyone (brace yourself, there is no good way to use these words together), we end up with a pretty crazy looking fare system. I don’t want to parrot what has been already laid out so well by Jarrett Walker, but essentially a “fair” scheme would have passengers on empty buses paying significantly more than passengers on full buses. That doesn’t seem right.

Maybe we need to leave the “fair” ideal of choosing what to charge people for transit behind; we certainly don’t seem to obsess about it with roads. What if we charged only the people on a quiet residential for the cost of maintaining that piece of road? Or only the people who drive on that road? People would crowd onto busy roads, knowing they would be cheaper for them to use, and smaller streets (which are essential access points for almost everyone) would fall into disrepair. I’ve said before that we need to think about transit (in some ways) like we think about other transportation infrastructure, and what seems ridiculous for roads might also be ridiculous for transit.

If we remove the restriction of trying to find a “fair” fare (last time, I promise), what else can we look at regarding fare choice, and what might a fare structure look like in those circumstances? In this post I’m going to throw a lot of ideas and scenarios out there, but I will not claim one is “right” or “better” than any other. This post is full of hypotheticals, and I’d love to hear what other people see in these ideas that I’m missing.

Flat or Variable Fares?

Before looking at specific goals, there is one larger overall philosophy that needs to be considered. Do we make a fare flat for every rider, no matter their trip length, or do we have a variable fair based on some criteria such as time, distance, transfers, or vehicle type used? In some way, a fixed fare has a certain fairness to it (sorry), since each user is being charged the same to “access the system” or “use the system”. With cars, this works similar to registration – you are paying a flat yearly fee to use the road system. For a taxi company, this seems crazy – no taxi driver in their right mind would pick up airport passengers if they would be paid the same as driving someone three blocks home from the bar.

Those two examples really demonstrate the two ways that one might think about transit as a whole: Is it an infrastructure that gets used by people, or is it a service that is provided by a company to transport? If you’re on board with the former (which, admittedly, I think I am) then you would probably advocate for people to get monthly (or even yearly) passes, and that’s it. No single fare use, just a “registration” on the network. While this might decrease ridership because you’re neglecting the people who use transit occasionally and spontaneously, it would make budgeting and planning a lot easier when there is a steady monthly flow of fares.

On the other hand, a fixed fare is inefficient, economically. For a commuting example, passengers who live farther from the core have a higher cost of travelling to the core regardless of their mode choice (that’s just a geometry problem), and would therefore be more willing to pay more for transit, as long as it’s cheaper (in every sense of the word). Ideally, transit agencies should charge them more simply because they’re willing to pay more. This is a wonderful example of the economic idea of price discrimination, and if it bothers you, remember: it’s used by airlines, it’s why there’s coupons, and it’s why there’s senior discounts at the movie theatre.

Maximize Ridership With Density Zones

In order to work this out, we’ll have to assume a few things:

  • The transit network in question has already been set up and will not change due to fare changes. Even better: let’s assume that the transit network has already been set up in a way to maximize ridership.
  • All else being equal, people are more likely to use transit if the fare is lower, and less likely to use it if the fare is higher. In short, people are price sensitive to transit fares. This is only somewhat true, since people have to travel regardless and sometimes do not have another option. Since those users form a sort of “baseline” transit use, they are going to be set aside for simplicity in this discussion.

With those caveats in mind, the goal of maximizing ridership would be to provide the lowest possible fare to the most amount of people. From a practical standpoint, this means drawing cheap zones around heavily used origin-destination pairs, like perhaps a high-density residential neighborhood and the downtown where most of them work. Of course, because of the restriction that a certain amount of revenue has to come form fares, this means charging a higher fare to passengers in low trip-generating areas. This all can happen regardless of the distance traveled: high-density to high-density could constitute a trip across the entire city, and require a much lower fare than a 4 stop bus ride in a sparse suburban neighborhood.

Maximize Revenue With a Transit Pass Auction

Maybe the goal of the transit agency is to maximize the revenue from transit fares – they may want to get as much money as possible to improve service and the network quickly. If that is the plan, then ideally we would want passengers to pay as much as they would be willing to pay before they stop using transit altogether (and thus pay nothing), which is the ideal form of price discrimination as described above. The best way to accomplish this, all practicalities aside, is with an auction. Maybe it could happen something like this:

A fixed number of monthly transit passes are put up for sale each month, and the price for the first one is set at $1 billion (or something silly high). The price is gradually lowered until someone buys it. The process is repeated until all the transit passes are sold.

There are a number of key elements to this process: one is that there is a limited supply of transit passes, since otherwise everyone could wait (if cooperative) until the price is zero and start buying them up. It’s also important that the potential bidders know this. Another key is the understanding (and assumption, really) that people will buy a transit pass once it’s at or lower than the price that they’re willing to pay. We also have to assume that everyone bidding wants a transit pass, and also knows there are plenty of other people that want one too. Because of this, the person who has the highest willingness to pay will buy the first pass at the highest price (outbidding everyone), and the next highest bidder will pay their maximum on the next pass, etc. Ideally, you would want exactly as many transit passes available as there are bidders (passengers), then you’ve sold all you’re going to sell at the highest possible price to each person.

Whatever your idea of fairness, correctness, or efficiency, there is a way to change transit fares around to motivate that goal. Just like almost every other aspect of planning, it depends on what you want as a community, or a transit agency, or a passenger. It also depends on how you think of transit in general. There are plenty of silly ideas here that contain a nugget of truth inside of them, and there is no perfect solution to the problem. What’s important, though, is that we understand the options, and stay fare aware.

…It’s been so hard not to make puns.

3 comments on “Fare Aware”

  1. Hermina Joldersma Reply

    The idea of auctioning transit tickets is kinda crazy BUT – we are willing to put up with it for e.g. certain forms of entertainment, if the theatre sells “rush tickets”. Theatre tickets are limited in number, and while theatres would like to sell them all at their top prices, if they don’t they’re willing to sell as many for as much as they can get.

    • Willem Reply

      Yep – you’ve found another example. People who are willing to pay more for a band (say, the band Rush) will by “rush Rush tickets”, or pay extra to sign up for the “Rush Club” and get advanced access.

  2. Pingback: Fare Enforcement and Risk Perception | Klumpentown

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