Peak-load pricing in public transport: a case study of Stockholm

Rantzien, Vilhelm Horn af; Rude, Anna

Abstracts

This paper studies how the price affects the demand for public transport in the peak- and off-peak period in the public transport in Stockholm. Further, the study investigates how differences in price elasticities of demand in the peak- and off-peak period can enable an increase in revenues as well as the total number of passengers while dampening the peak-load problem through price discrimination. The data is set up to examine the effect of the price on the number of passengers travelling by subway from January 1999 to December 2008. A number of control variables are used to isolate the effect of a price change in our econometric model. Thereafter, the elasticities of demand for each period are calculated in order to find Ramsey prices that can be used when a monopoly firm maximizes profit and minimizes the welfare loss. The study concludes that the price elasticities of demand differ between the peak- and the off-peak period and that SL should charge a higher price in the peak-period and a lower price in the off-peak period to both increase their revenue, the total number of passengers, and reduce their problems associated with the peak-load demand.

peak-load; price elasticity; price discrimination; Ramsey pricing

Este trabalho estuda como o preço afeta a demanda por transporte público nos períodos de pico e fora de pico no transporte público em Estocolmo. Além disso, o estudo investiga como, por meio de discriminação de preço, as diferenças de elasticidades-preço da demanda nos períodos de pico e fora de pico podem permitir um aumento nas receitas, bem como o número total de passageiros, enquanto o problema do pico de carga é suavizado. Os dados são configurados para examinar o efeito do preço sobre o número de passageiros que viajam de metrô entre janeiro de 1999 e dezembro de 2008. Um conjunto de variáveis de controle é usado para isolar o efeito de uma mudança de preço no modelo econométrico utilizado. Depois disso, as elasticidades da demanda para cada período são calculadas a fim de encontrar os preços de Ramsey, que podem ser usados quando uma empresa monopolista maximiza lucros e minimiza a perda de bem-estar. O estudo conclui que as elasticidades-preço da demanda diferem entre o pico e o período fora de pico e que a empresa monopolista SL deveria cobrar um preço mais elevado no período de pico e um preço mais baixo no período fora de pico, tanto para aumentar a sua receita, o número total de passageiros, como para reduzir os seus problemas associados com a demanda de pico de carga.

carga de pico; elasticidade-preço da demanda; discriminação de preços; precificação de Ramsey

Balcombe, R., Mackett, R., Paulley, N., Preston, J., Shires, J., Titheridge, H., Wardman, M. and White, P. (2004) The demand for public transport: a practical guide, TRL593. Available at www.demandforpublictransport.co.uk.
Baumol, W. J., (1995) Modified regulation of telecommunications and the public-interest standard, In: Bishop, M., Kay, J. and Mayer, C. (eds.) The Regulatory Challenge. Oxford: Oxford University Press.
Baumol, W. J. and Bradford, D. F. (1970) Optimal departures from marginal cost pricing. American Economic Review, vol. 60, n. 3, pp. 265-283.
Besanko, D., (2001) Microeconomics – an integrated approach 1^st edition, John Wiley & Sons.
Boituex, M. (1960), Peak-load pricing. Journal of Business, vol. 33, n. 2, pp. 157-179.
Charles River Associates (1997) Building transit ridership: an exploration of transit's market share and the public policies that influence it, Transit Cooperative Research Program Report 27.
Cummings, C. P., Fairhurst, M., Labelle, S. and Stuart, D. (1989) Market segmentation of transit fare elasticities. Transportation Quarterly, vol. 43, n. 3, pp. 407-420.
Doi, M. and Allen, W. B., (1986) A time series analysis of monthly ridership for an urban rail rapid transit line. Transportation, vol. 13, n. 3, pp. 257-269.
Edlund, P-O. (1997) SPSS för Windows 95, Multipel regressionsanalys (version 7.5). Lund: Studentlitteratur.
Fearnley, N. (2004) Inventive pricing in urban public transport, Institution of Transport Economics, Oslo. Available at www.aetransport.org
Gujarati, D. N., (2003) Basic econometrics, 4th edition. Boston: McGraw-Hill.
Higginson, M., (2002) Public transport finance, UTIP position statement, final version 11 – long version 30.
Kessides, I. N. and Willig, R. D. (1995) Restructuring regulation of the rail industry for the public interest, Volume 1, World Bank Policy Research Working paper 1506, WB Private Sector Development Department.
LTI Consultants, Inc. and E. A. France and Associates (1988) Fare structure analysis. Prepared for the Chicago Transit Authority, Chicago, IL.
Mayworm, P. D., Lago, A. M., and McEnroe, J. M. (1980) Patronage impacts of changes in transit fares and services. Prepared for the Urban Mass Transportation Administration, Econometrics Incorporated, Bethesda, MD.
Nilsson, J-E. (1992) Second-best problems in railway infrastructure pricing and investment. Journal of Transport Economics and Policy, vol. 26, n. 3, pp. 245-259.
Olsson, Tegnér and Gustafsson (2000) Sl-taxan – 3 scenarier. Prepared by Transek for SL, Stockholm, Sweden.
Oum, T. H., Waters II, W. G. and Yong, J-S. (1992) Concepts of price elasticities of transport demand and recent empirical estimates: an interpretative survey. Journal of Transport Economics, vol. 26, n. 2, pp. 139-154.
Perloff, J. M. (2007) Microeconomics – theory and applications with calculus: international edition 4^th edition. Boston, Mass.: Pearson Addison Wesley.
Pigou, A. C. (1929) The economic of welfare 3^rd edition. London: Macmillan.
Pratt et al. (2000) Travelers response to transportation system changes, Interim Handbook, TCRP Web Document 12 (project B-12), available at www.trb.org.
Ramsey, F. P. (1927) A Contribution to the theory of taxation, The Economic Journal, vol. 37(145), 47-61.
Reinke, D. (1988) Recent changes in BART patronage. Transportation Research Board 67^th Annual Meeting, Washington, DC.
Statistics Sweden (2010) Arbetsmarknadsstatistiken på SCB. Brochure Stockholm. Available at www.scb.se.
Stockholm Public Transport (2009) Annual report 2009. Brochure, Stockholm. Available at sl.se.
Stockholm Public Transport (2008) Fakta om SL och länet 2008. Brochure, Stockholm. Available at sl.se.
Stockholm Public Transport (2009) This is Stockholm Public Transport - a presentation of our activities. Brochure Stockholm. Available at www.sl.se.
Tegnér, G., (2002) SL:s resandeutveckling 1997-2001 – Komponentanalys. Prepared by Transek for SL, Stockholm.
Transek (2005) Fyra taxestrategier för SL – Utformning samt konsekvenser för resor, ekonomi och fördelning. Prepared by Transek for SL Stockholm.
Vickrey, W. S. (1963) Pricing in urban and suburban transport, The American Economic Review, vol. 53, n. 2, pp. 452-465.
Wooldridge, J. M. (2009) Introductory econometrics – a modern approach, 4^th edition. Canada: South-Western Cengage Learning.
WSP Sverige AB (2009) Privata partners för bättre information på väg – Analys av samverkansmodeller för informationstjänster inom vägtrafiken. Prepared by WSP Group AB for SL, Stockholm. Available at www.sou.gov.se

Publication Dates

Publication in this collection
31 Jan 2014
Date of issue
Jan 2014

History

Accepted
29 Jan 2013
Received
29 Dec 2012
Reviewed
17 Jan 2013

This work is licensed under a Creative Commons Attribution 4.0 International License.

[1] Balcombe, R., Mackett, R., Paulley, N., Preston, J., Shires, J., Titheridge, H., Wardman, M. and White, P. (2004) The demand for public transport: a practical guide, TRL593. Available at www.demandforpublictransport.co.uk.

[2] Baumol, W. J., (1995) Modified regulation of telecommunications and the public-interest standard, In: Bishop, M., Kay, J. and Mayer, C. (eds.) The Regulatory Challenge. Oxford: Oxford University Press.

[3] Baumol, W. J. and Bradford, D. F. (1970) Optimal departures from marginal cost pricing. American Economic Review, vol. 60, n. 3, pp. 265-283.

[4] Besanko, D., (2001) Microeconomics – an integrated approach 1^st edition, John Wiley & Sons.

[5] Boituex, M. (1960), Peak-load pricing. Journal of Business, vol. 33, n. 2, pp. 157-179.

[6] Charles River Associates (1997) Building transit ridership: an exploration of transit's market share and the public policies that influence it, Transit Cooperative Research Program Report 27.

[7] Cummings, C. P., Fairhurst, M., Labelle, S. and Stuart, D. (1989) Market segmentation of transit fare elasticities. Transportation Quarterly, vol. 43, n. 3, pp. 407-420.

[8] Doi, M. and Allen, W. B., (1986) A time series analysis of monthly ridership for an urban rail rapid transit line. Transportation, vol. 13, n. 3, pp. 257-269.

[9] Edlund, P-O. (1997) SPSS för Windows 95, Multipel regressionsanalys (version 7.5). Lund: Studentlitteratur.

[10] Fearnley, N. (2004) Inventive pricing in urban public transport, Institution of Transport Economics, Oslo. Available at www.aetransport.org

[11] Gujarati, D. N., (2003) Basic econometrics, 4th edition. Boston: McGraw-Hill.

[12] Higginson, M., (2002) Public transport finance, UTIP position statement, final version 11 – long version 30.

[13] Kessides, I. N. and Willig, R. D. (1995) Restructuring regulation of the rail industry for the public interest, Volume 1, World Bank Policy Research Working paper 1506, WB Private Sector Development Department.

[14] LTI Consultants, Inc. and E. A. France and Associates (1988) Fare structure analysis. Prepared for the Chicago Transit Authority, Chicago, IL.

[15] Mayworm, P. D., Lago, A. M., and McEnroe, J. M. (1980) Patronage impacts of changes in transit fares and services. Prepared for the Urban Mass Transportation Administration, Econometrics Incorporated, Bethesda, MD.

[16] Nilsson, J-E. (1992) Second-best problems in railway infrastructure pricing and investment. Journal of Transport Economics and Policy, vol. 26, n. 3, pp. 245-259.

[17] Olsson, Tegnér and Gustafsson (2000) Sl-taxan – 3 scenarier. Prepared by Transek for SL, Stockholm, Sweden.

[18] Oum, T. H., Waters II, W. G. and Yong, J-S. (1992) Concepts of price elasticities of transport demand and recent empirical estimates: an interpretative survey. Journal of Transport Economics, vol. 26, n. 2, pp. 139-154.

[19] Perloff, J. M. (2007) Microeconomics – theory and applications with calculus: international edition 4^th edition. Boston, Mass.: Pearson Addison Wesley.

[20] Pigou, A. C. (1929) The economic of welfare 3^rd edition. London: Macmillan.

[21] Pratt et al. (2000) Travelers response to transportation system changes, Interim Handbook, TCRP Web Document 12 (project B-12), available at www.trb.org.

[22] Ramsey, F. P. (1927) A Contribution to the theory of taxation, The Economic Journal, vol. 37(145), 47-61.

[23] Reinke, D. (1988) Recent changes in BART patronage. Transportation Research Board 67^th Annual Meeting, Washington, DC.

[24] Statistics Sweden (2010) Arbetsmarknadsstatistiken på SCB. Brochure Stockholm. Available at www.scb.se.

[25] Stockholm Public Transport (2009) Annual report 2009. Brochure, Stockholm. Available at sl.se.

[26] Stockholm Public Transport (2008) Fakta om SL och länet 2008. Brochure, Stockholm. Available at sl.se.

[27] Stockholm Public Transport (2009) This is Stockholm Public Transport - a presentation of our activities. Brochure Stockholm. Available at www.sl.se.

[28] Tegnér, G., (2002) SL:s resandeutveckling 1997-2001 – Komponentanalys. Prepared by Transek for SL, Stockholm.

[29] Transek (2005) Fyra taxestrategier för SL – Utformning samt konsekvenser för resor, ekonomi och fördelning. Prepared by Transek for SL Stockholm.

[30] Vickrey, W. S. (1963) Pricing in urban and suburban transport, The American Economic Review, vol. 53, n. 2, pp. 452-465.

[31] Wooldridge, J. M. (2009) Introductory econometrics – a modern approach, 4^th edition. Canada: South-Western Cengage Learning.

[32] WSP Sverige AB (2009) Privata partners för bättre information på väg – Analys av samverkansmodeller för informationstjänster inom vägtrafiken. Prepared by WSP Group AB for SL, Stockholm. Available at www.sou.gov.se

Brasil

Brasil

Peak-load pricing in public transport: a case study of Stockholm

Precificação de carga de pico nos transportes públicos: um estudo de caso de Estocolmo

Abstracts

Publication Dates

History