1. 1 Efficient pricing of urban public transport with budget constraints Nils Fearnley Institute of Transport Economics, Oslo E-mail: naf@toi.no

2. 2 Financing public transport in Norwegian city Trondheim Operating revenue/cost

3. 3 Efficient pricing with budget constraint MC pricing not possible  Deficit Yield management  Max profit Ramsey-prising  Minimise welfare loss caused by budget constraint Price differentiation 

4. 4 Quality and quantity differentiation Quantity: –Number of trips: multi-journey coupons, group tickets, family tickets etc –Distance: Zone systems, city centre ticket Quality: Passengers’ WTP vary with i.a.: –Means of public transport –Travel time –Departure time –Interchanges –Etc

5. 5 Differentiation of demand segments OAP, student, family, military etc Niche markets Requires indisputable segmentation of passengers Pricing must reflect segment’s price elasticity/WTP

6. 6 Differentiation – disadvantages? Rebates and surcharges: unfair? Too complex fare structure?  Trade off between simple and “fair” systems and efficient cost recovery  Create goodwill with attractive rebates

7. 7 Patronage growth opportunities Elastic demand: Short and long trips Leisure and off peak Long term Rail Combine peak surcharges and off peak rebates to maintain revenue

8. 8 Is efficient pricing possible? Rigid fare scales and political opposition? Problems related to integrated fares between cities, transport modes, operators? Practical implementation? Some examples 

9. 9 Time differentiation Sweden: Stockholm: Wild card, Monthly weekend card Gothenburg: Peak/off-peak season tickets England: Off-peak saver tickets in most of England US: Rebated off-peak day and season tickets

10. 10 Surcharge on higher standard modes Oslo airport access:

11. 11 Surcharge on other quality Express bus: USAircondition: Singapore

12. 12 Rebated presale €

13. 13 Hong Kong No season tickets! Campaigns: Go via selected metro stations and have HK$2 paid back to you Octopus card Make 10 trips within a week and get one trip free Rebates if you start your journey before the morning peak Souvenir tickets 

14. 14 Summary Low subsidies necessitate price differentiation to maintain service levels General fare increases are not efficient and cause unnecessary passenger loss Efficient cost recovery: Fares reflect MC and WTP/elasticities (=Ramsey pricing) It is possible! But need to know market and costs