P A. Pedersen

Document Type

Journal Article

Publication Date


Subject Area

operations - capacity, infrastructure - vehicle, land use - planning, policy - fares, economics - operating costs, economics - pricing, place - urban


Welfare economics, Vehicle capacity, Urban transit, Trip length, Travel distance, Supply, Social costs, Short range planning, Ridership, Pricing, Person capacity, Patronage (Transit ridership), Optimization, Optimisation, Operating costs, Marginal costs, Long range planning, Fares, Externalities, Decision making, Cost of operation


This paper examines how a public transport operator, maximizing social welfare, should design an optimal policy in the short run, medium run and long run when inflexibilities on the supply side exist. Additionally, there might be two types of capacity constraints: (1) the actual number of travelers in a period cannot be above the actual seat capacity supplied by the operator; and (2) the number of seats supplied by the operator cannot exceed the maximum seat capacity given by the fleet of vehicles the operator controls in the period. Four different situations are outlined. It is demonstrated that in situations where an operator has an excess of vehicles and the load factor on the routes is lower than it could have been, fares should be equal to the cost the last passenger causes on the operator, plus the cost caused on other travelers. In the long run, however, fares should be equal to the sum of the long range marginal operating costs and the costs an additional passenger is causing on other travelers minus the gain in reduced time costs for all of the passengers that the final unit of supply brings. Other findings, including how fare level should vary with regard to consumer travel distances, are discussed.


Transportation Research Part B Home Page: http://www.sciencedirect.com/science/journal/01912615