USER COSTS IN PUBLIC TRANSPORT: A COST MINIMISATION APPROACH.

Abstract

The aim of this paper is to outline a new frequency related user cost model for use, for example, in the analysis of public transport subsidy. The need for such a model is predicated on a perception that existing models have a number of deficiencies. In particular, existing models lack a sound theoretical economic foundation, rarely take account of the frequency delay (or inconvenience) cost of service scheduling, do not recognise the important role played by service unreliability in determining user cost and fail to explain the empirically observed switching between random and planned behaviour by passengers. The model proposed here overcomes these deficiencies. In the new model, the consumer chooses between random and planned behaviour with the objective of minimising user costs (or, equivalently, user disutility). Under random behaviour the consumer has imperfect information with respect to service departure times. He may, however, switch to planned behaviour by acquiring detailed information on service departure times, but at a cost. An important feature of the model is the existence of a critical headway at which the consumer will switch between random and planned behaviour. For headways below and above the critical headway, behaviour will be random and planned respectively. The key variables in the cost minimisation model are information cost, degree of service unreliability, unit waiting time cost, unit frequency delay cost and headway . User cost increases with increases in each of these variables. We show that the determ i nation of frequency related user cost is highly model sensitive. Consequently, given the stronger theoretical basis of the cost minimisation model, the potential exists for its use to improve the accuracy of user cost prediction. This is of considerable importance in areas of application in which frequency related user cost plays a central role, for example, in public transport subsidy determination. (*) Final version : February 1991. (**) Peter Tisato is a Lecturer , Economics Department, University of Adelaide. He wishes to thank Andrew Evans, Stephen McDonald, Derek Scrafton, Paul Duldig and Margaret Starrs for their helpful comments on drafts of his Master of Economics thesis from which this paper was developed. This content downloaded from 207.46.13.21 on Tue, 27 Sep 2016 04:15:28 UTC All use subject to http://about.jstor.org/terms

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