Scandinavian Working Papers in Economics

Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)

No 2018:1: Socially optimal fares and frequencies for urban bus services in small cities

Disa Asplund and Roger Pyddoke
Additional contact information
Disa Asplund: CTS - Centre for Transport Studies Stockholm (KTH and VTI), Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Roger Pyddoke: CTS - Centre for Transport Studies Stockholm (KTH and VTI), Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden

Abstract: This paper evaluates welfare effects of optimization of fares and frequencies for bus services in small cities. The model used takes into account both congestion on streets and crowding in public transport vehicles, and is calibrated with data for the Swedish city of Uppsala. Four policies are evaluated: optimal fares with unchanged baseline frequencies, optimal frequencies with unchanged baseline fares, simultaneous optimization of fares and frequencies, and finally a so-called Pareto scenario where frequencies and fares are optimized subject to the condition that no consumer group (defined by zone, time period, and origin-destination pair) should be worse off in terms of generalized cost of each trip. The results indicate that there would be large, robust welfare gains from reducing public transport supply in Uppsala, especially in the outer zone of the city where reductions of supply compared with the current situation are large. The welfare gains from adjusting fares would be smaller. The large reductions in consumer welfare in the welfare optimum, however, are likely to be controversial. In the Pareto scenario, almost all potential social welfare gains from the welfare optimal scenario are achieved with no consumer in any zone or time period being worse off compared with the baseline policy. In this scenario, the total number of public transport passengers is increased and emissions are reduced compared with the current situation.

Keywords: Public transport; bus; demand model; fares; frequencies; supply; optimization; urban; welfare

JEL-codes: R10; R41; R48

36 pages, First version: February 19, 2018. Revised: February 19, 2018.

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