TRANSIT FARE DIFFERENTIALS: A THEORETICAL ANALYSIS

This paper compares the ridership, operator revenue, passenger-km/mi, and consumer surplus in uniform pricing policy versus the differential fare pricing system. The comparisons are assumed that the flat fare is set equal to average differential fares. With mathematical derivation, the paper investigates some of the properties of fare differentiation and discusses characteristics of a general nature. The theoretical results have spelled out the conditions under which pricing policy may yield higher performances. A simple numerical example is used to demonstrate the sensitivity of the model. Some recommendations for setting transit pricing policy are drawn from the results.