Referential transit prices for users of reduced fare programs
Sergio Jara-Diaz (),
Diego Cruz and
Felipe Tapia
Research in Transportation Economics, 2025, vol. 110, issue C
Abstract:
Students, elderly, handicapped, and low-income individuals can apply for reduced fare programs (RFPs) in many cities worldwide. Such programs represent specific social preferences for those groups. However, prices in RFPs are always reported as a fraction of the so-called full fare, which is presented as society's willingness to favor those groups for whatever reasons. We argue that full fares are not the correct reference for comparison because special groups exhibit differences in how they use the transit system (e.g., different trip lengths, boarding times, or different occupation of vehicle space), which induces differences in marginal costs. By expanding the well-known one-line stylized transit model to admit different user types, we show that marginal cost fares depend on trip characteristics such as boarding-alighting times and/or average trip lengths. These group-specific marginal cost (first best) prices are proposed as the appropriate reference for comparison with the observed fares. This means that social preferences for special groups should be reflected by fares lower than the corresponding marginal social cost. This general theoretical framework is applied to elders and students using parameters from Santiago, Chile, where observed fares are lower than the full fare but higher than the estimated marginal social cost.
Keywords: Reduced fares; Special groups discounts; Public transportation; Optimal pricing (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0739885925000162
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:retrec:v:110:y:2025:i:c:s0739885925000162
Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_2&version=01
DOI: 10.1016/j.retrec.2025.101533
Access Statistics for this article
Research in Transportation Economics is currently edited by M. Dresner
More articles in Research in Transportation Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().