Because values of time and passenger behaviour depend on the level of frequency it is found that: (1) in urban public transport there may be one low-deficit local optimum and one high-deficit local optimum, one of which is global; (2) contrary to what might be expected, optimal financial deficit per passenger is typically larger for high frequency services than for low-frequency services; (3) the optimal off-peak may exceed the optimal peak price.
Topic: 13.6 Other
The authors derive the Ramsey pricing rule in the presence of externality costs. They find that it is based, not on social marginal costs, but on the sum of marginal private costs and a fraction of marginal externality costs. Thus the Ramsey quantity rule does not hold.
Pricing rules are derived under different objectives for schemes including travelcards and ordinary tickets. To calculate the effects on revenue of different combinations of fares it is necessary to know the distribution of the population in terms of trip behaviour.
Ramsey Pricing of Inputs with Downstream Monopoly Power and Regulation. Implications for Railroad Rate Setting
The rules of Ramsey pricing should be adjusted where the regulated firm is not selling to consumers or to perfectly competitive industries. Some rail charges should be below Ramsey prices.
Building on previous discussion in this Journal, the author suggests that optimum subsidies could possibly be as high as 60 per cent of an operator’s costs. But fares and the level of service should also be controlled. travel cards may provide a form of two-part tariff for public transport.
The author finds that marginal cost pricing leads to slower expansion of capacity than either higher or lower pricing. transport planners are advised how to find the same optimum expansion dates under common forms of user fees as under marginal cost pricing.
After reviewing the various proposals for taxing traffic and aircraft noise, the authors suggest a formula aimed at reducing noise at the source and at raising revenue to be used for mitigating noise in the environment.
Welfare loss might be reduced by requiring total revenues from all units in an urban transport system to meet a proportion of total costs, instead of applying the constraint to each unit separately. This may need an agency to administer prices and cross-subsidisation. Prices are calculated for the East Bay Area of the San Francisco Bay Area.
This article argues that carriers have every incentive to co-operate voluntarily in the provision of coordinated services where these are more efficient than service by a single mode. The largest profits flow from the most efficient services. But there must be efficient pricing and shippers must respond rationally.