Pricing in Mass Transportation

The purpose of this paper is first, to review briefly the current pricing policy of urban transportation, and the privately operated bus transit company in the Milwaukee area is examined. The investigation finds that a lowered bus fare, together with improved service, will substantially increase transit patronage, which will in turn reduce the cost of operating bus transit as a consequence of the existence of the economy of scale. The paper examines the characteristics of mass transit users in this country and concludes that the majority of the transit riders are captive riders in the sense that they do not have any choice in their mode of transportation. This finding substantiates the hypothesis that mass transit fare should be significantly reduced, not just for attracting automobile users to transit and thus to limit congestion, but also for increased social welfare resulting in improved equity.