Fare evasion in public transport: How does it affect the optimal design and pricing?

Title

Fare evasion in public transport: How does it affect the optimal design and pricing?

Author
Line(s)Acceso y Movilidad
Year of Publication2023
Journal Title

Transportation Research

Keywords
Public transport, Fare evasion, Fare dodging, Pricing, Design, Subsidy, Inspection, Welfare.
AbstractFare evasion produces significant revenue losses in public transport systems. Recent research has found that low service quality and high prices are important determinants of fare evasion. However, the economic literature that studies the optimal public transport provision has overlooked the phenomenon. We develop a demand model of horizontal differentiation to investigate how fare evasion affects the design and pricing of public transport that maximizes utilitarian social welfare. We show analytically that fare evasion can create incentives to reduce public transport prices and improve service quality, putting upward pressure on its subsidization. We perform numerical simulations and sensitivity analysis to quantify the impact of these incentives on the public transport provision. These simulations confirm that the incentive to reduce fare evasion can lead to an optimal design and price that requires subsidies.
Doihttps://doi.org/10.1016/j.trb.2023.102803 
Corresponding AuthorHugo Silva, husilva@uc.cl