The problem with the large fare hikes you’re contemplating is that not everyone is your idealized worker, who works regular hours but can get up an hour earlier and who has no access to mechanized transportation other than rapid transit. In fact, most people aren’t. In New York, when subway fares kept rising in the 1970s and 80s, ridership first fell and then stayed low, even as the quality of service was increasing. People just chose not to take the subway – they took taxis or drove if they could afford it. And although parking downtown is hard, you can do it – even in Manhattan, if you know a neighborhood well enough, you’ll know where to find free parking there.

I largely agree with your point that the majority of rush-hour trips are made by workers with little flexibility in their schedules. In fact, that’s my point. That’s what makes this a price-inelastic market segment, one that’s ripe for the pickin’, in terms of higher fares.

But, while it may be a majority, it’s not the vast majority. Example: I choose to get up at a reasonable hour, have a reasonable cup of coffee and catch the 156 in Chicago at about 7:45 — peak time. The buses are full. SRO. I roll into work between 8:45 and 9:00. If properly incentivized monetarily, I could leave before 7:30, when you always get a seat. Ditto return trip.

I think the days when working hours are strictly regimented no longer apply to a pretty good segment of commuters, especially professionals. They commute at peak times out of habit, convenience, whatever, but there’s no overriding necessity for them to do so.

But even if only 10% of rush-hour ridership could time-shift, that would have a huge effect on peak capital capacity requirements. Even five percent.

Plus, I believe your argument is based more on what the state of affairs is today. A steep fare differential could change the dynamics and actually increase the percentage of work-bound riders who can be flexible. How?

The larger the surcharge placed on rush-hour commuting, the more pressure will be exerted on employers to experiment with flex-time. This creates a virtuous circle, no? (And I’m contemplating a surcharge of a dollar or two on a one-way rush-hour trip to a CBD — $20/week, $80/month. That’s enough to get some employees and employers thinking.)

Best,

Iron

Cheesh. Just re-read your original post — last para — and I see that you did, in fact, touch on the basic point I was making in my comment. Only difference between your observation and mine is that yours seems to have been a bit of an after-thought, while mine is actually the driving factor. We’d need a good spreadsheet to see whose emphasis is more accurate, I guess. Maybe another reader can weigh in on this?

Let me focus on one thing you stated in your post: “There are two basic goals one can pursue: revenue maximization or ridership maximization. I would suggest that maximizing ridership is a better goal.”

I don’t see these as either/or propositions, except in the theoretical sense you learn about in Microeconomics 101, where a demand curve and a cost curve cross at some point.

I think you can both maximize revenue (net revenue, that is) and ridership at the same time. But to do so, you need to focus on two other variables: (a) time of day of travel and (b) destination. They go hand-in-hand in establishing peak demand.

To explain, I’ll elaborate on your analogy to airline pricing, which is spot-on. Airlines manipulate their ticket prices for two reasons.

The first reason, which you point out, is to maximize revenue for the price-inelastic segment of the market – the business traveler. You can spot him/her, because s/he often has no choice but to fly at peak times. Further, those travelers often are travelling to identifiable destinations (in the case of Chicago, for example, NYC, DC, LA, ATL – Orlando? Not so much). So you capture that higher fare by charging more to fly at peak times and also charge a premium if that trip is to a high-demand city-pair.

The second reason, which you don’t discuss, but which, I would argue, is even more important to the airlines, is to actually DECREASE peak ridership. For airlines, like public transit systems, peak demand drives fleet size. It also drives other capital costs, such as the number of runways needed, size of terminals, etc. – all costs that are ultimately borne by the airlines. The more you can shift ridership to off-peak hours and to less-travelled airports, the more efficiently you use your infrastructure. This allows you to reduce fleet size. It also allows you to reduce your on-the-ground costs, by using excess runway and terminal capacity at, say, the Orange County or Baltimore airports rather than pouring more concrete at LAX or Reagan in DC. Charging peak prices at peak times will incentivize the price-elastic market segment to shift to off-peak travel times and to less congested airports. You have now effectively shifted – but not reduced – demand. Voila. This was the backbone of the Southwest Airlines strategy, and it allowed it to effectively beat the pants off the bigger airlines.

That’s why I argue that in the real world you don’t have to choose between maximizing [net] revenue or maximizing ridership — except at the peak. The name of the game is to redistribute demand geographically and temporally, and the fare structure is the perfect way to accomplish this.

Seems to me that a transit authority should charge whatever the market will bear for peak-time commuter service. Likewise, it makes sense to charge what the market will bear for trips to a high-demand destination like a CBD. Number 1, you can. You’re largely dealing with a price-inelastic market segment. And your competition, in terms of alternative commuting modes, is particularly pricey, when you figure in parking charges, commuting times, scarcity of taxis at that hour, etc. (As for lower-income commuters with jobs who have to travel at peak times and who will have more trouble paying peak fares, there are a number of ways you can subsidize them individually or as a group, but for heaven’s sake, don’t subsidize the entire ridership. Why should a junior ad exec get a subsidy, too?)

Number 2, if you can level off the peaks, you can reduce fleet size and frequency of service during rush hours, thus reducing both capital/fixed AND variable costs, plus achieving other off-balance sheet type costs, such as overall traffic congestion (reduced air pollution through idling time, etc., etc.).

As for-off-peak use mass transit, you might as well give it away for free, for all the reasons you previously discussed. Given the other factors at work (convenience, predictability, possibility of cheaper parking at a non-CBD destination, possibly shorter travel time due to travelling at non-rush hour, etc.), the competitive advantages of alternatives to mass transit are all over the place, and saving a buck or so isn’t going to be the deciding factor for the typical traveler.

Cheers,

Ironwood

I don’t think this is right. Zoning might mandate a certain amount of parking but there’s nothing that says that it has to be “free” parking. There’s plenty of people who pay through the nose to get a parking spot as part of their office or residential space in urban areas even when that parking is required by zoning. The requirement for parking as part of an urban development is usually counterproductive. But it’s presence probably has little impact on parking prices.

From the developer’s perspective, parking is an amenity but it’s also a hassle. It sucks up leasable space and often requires expensive construction (parking decks for example) to provide it. But how many major cities require parking in their downtown core?

Speed, I don’t want to get into libertarian style arguments here, but I do think you need to factor in the positive externalities (e.g., increased land values in dense cities like NYC, Chi, and SF) when evaluating the profitability of transit. I think land value taxation is the right way to finance.

anon 5:24, if you are getting to where pricing is primarily to discourage homeless people from riding, then I think you’ve already lost. The right answer is to deal with the homeless directly, not to try to implement punitive measured aimed at them throughout our public services, especially when that negatively affects the average citizen.

Again, great comments everybody.

These are barriers you mention but not insurmountable ones. My idea addresses both points. Think of the bus system as the public library – everyone has a card and membership requires responsible use.

1.) A fareless (or better yet off-peak fareless only) system should still require everyone to swipe a cards before boarding. The transit company collects data on ridership and useage to improve routes and timing.

2.) By swiping cards for both boarding and exit, the data network can identify patrons who are abusing the system. Certainly the threshhold should be high before eliminating or suspending ones riding privleges but it would cut down the loitering on a particular bus or those who jump all day form bus to bus to avoid suspicion. Other measures could be imposed to supplement this approach’s effectiveness. Additionally it could help with prosecuting crimes commited on buses such as pick pocketing and purse snatching.

3.) ALON mentioned this one above so read his post, but having a card that one does not have to swipe but merely can be read by other means would make this possible and not increase boarding/exiting times. Possibly something similar to bar codes in library books, or security tags at a department store. Wireless and easy – let some “tech guys” figure it out.

I recognize your concern about “subsidising sprawl” through transit, though consider that many American cities already contain a 15 to 20 mile radius of solid urban and suburban development that is here to stay and needs to be appropriately managed in the future. Transit oriented development might be the key for redeveloping inner ring suburbs into medium to high density areas with connections to other parts of the city.