On the interaction between public transport demand, service quality and fare for social welfare optimisation

Document Type

Journal Article

Publication Date


Subject Area

planning - service quality, ridership - demand, ridership - elasticity, economics - operating costs, policy - fares


Fare level, City characteristics, Public transportation network optimization


This paper analyses the interaction between fares and public transport service quality. With higher fares the operator has more resources to provide a better service, while demand in turn depends on both service quality and fare leading therefore to the question as to whether there is an optimal fare for different city scales. The model builds on the work of Daganzo (2010) who determines optimal network headway, stop spacing as well as the ratio of a central dense service area compared to the whole city size. In contrast to Daganzo we include fare and demand elasticity. With this it is possible to obtain some general insights for a range of cities on what type of fare levels are favorable. We focus on a flat fare structure, finding that from the viewpoint of maximizing social welfare, lower fares are preferable. If the operator cost coverage ratio is considered as objective function then there exists an optimal fare above the minimum fare. We illustrate the possible existence of critical fare points, at which the demand and service quality of public transport suddenly drop if an attractive alternative mode exists. We discuss further the impact of city size and demand density on optimal fares and service quality.


Permission to publish the abstract has been given by Elsevier, copyright remains with them.


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