Does Transit Mean Business? Reconciling Economic, Organizational, and Political Perspectives on Variable Transit Fares

Abstract

For decades, transportation scholars have argued for transit fares that vary by mode, distance, and/or time-of-day to reflect the marginal costs of providing transit service. This pricing strategy, they contend, would increase the efficiency and equity of transit service. Recent advances in smartcard fare collection technologies have reduced the operational obstacles to charging variable fares, yet relatively few transit agencies are doing so. Through interviews and a nationwide survey of transit professionals, this research examines why transit managers and their governing boards have been reluctant to adopt variable fare policies. We find that agencies and practitioners have little incentive to understand how the costs of transit service provision vary and that managers and policymakers tend to be loss averse—they worry more about the riders they might lose under variable pricing than those they might gain. Collectively, we find that transit agency objectives impede fare policy innovation.

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