ASSESSMENT OF A TRANSIT FARE INCREASE: THE CASE OF THE SOUTHEASTERN MICHIGAN TRANSPORTATION AUTHORITY

Results of a study of a 15-cent across-the-board increase in fares carried out in July 1981 by the Southeastern Michigan Transportation Authority (SEMTA) are detailed. Data from the same riders were gathered both before and after the fare increase; econometric methods tailored to these data were used. The results indicate that sensitivities to the fare increase vary noticeably across types of service. In particular, transit trip making in the off-peak period appears to be nearly twice as sensitive as that in the peak periods. Although fare increases appear to be virtually certain of raising revenues somewhat, differential pricing by time of day would appear to hold promise as a means of maximizing revenues. It is clear that a wide variety of factors influences the use of bus transit. Even if most transit-related factors other than fares (e.g., headways) are virtually constant during the period of study (as was true in the SEMTA system), many nontransit factors (e.g., whether a person works, location of job, location of home) change continually for enough riders to make a difference. Conclusions drawn about riders' sensitivities to fare increases that do not account for changes in nontransit factors are likely to be erroneous. The implications of the findings for pricing policies are presented. To show the possible uses of the results by SEMTA and other transit agencies, examples are given of how to aggregate up to the entire system of patrons and to predict the effects of future fare increases on levels of ridership and revenue. Highlights of the analyses are also given in terms of the relative importance of fares in the use of transit.