Monday, July 21, 2025

Mode choices & transit pricing

I make a regular trip to a yoga studio. It's about a mile and change from my house. I can drive, bike or take the train--all will get me there in 17-23 minutes. I drive more often than I'd like, because the parking AT THE METRO STATION PNR is free (unenforced), while the Metro ride will cost me $5.  This is despite the fact that I know (intellectually) that driving is costing me 62 cents a mile--but I also know that most of that is a marginal cost--my car will depreciate regardless, and I'll still need to pay insurance (regardless of how many miles I drive). Most people don't even consider the marginal cost of driving, especially beyond gasoline. (Everyone I've ever talked to 'budgets' by curtailing trips by pay-period.) 

We want more people to choose transit. If you want people to do more of an activity, you can make it cheaper. But you can also make it seem cheaper by hiding the cost from them: 1) reduce the marginal cost of a journey to zero, 2) put a lump-sum payment on auto-renewal (with unlimited use), 3) make someone else pay for it.

Transit agencies should also get rid of 'monthly' passes, and start selling '31 day' passes, so someone who can't buy the whole loaf on the first of each month isn't screwed, and so there is never a reason anyone should delay buying a bundle. Which also enables households to budget to all the main expenses (rent+ & transportation) aren't falling due on the same day an in the same paycheck. 

And for every transit agency with space capacity (and that's every agency, some time of the day), there should be dynamic pricing. (Once you're running a vehicle-trip, there's almost no marginal cost to letting more people on the bus). An economist will tell you to charge a premium for the peak, but an advertiser will tell you to offer a discount for the off-peak--when prices change unexpectedly, people should get a pleasant surprise.  

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