02-19-2019, 10:02 AM
(This post was last modified: 02-19-2019, 10:02 AM by danbrotherston.)
(02-19-2019, 09:50 AM)jwilliamson Wrote:(02-19-2019, 09:40 AM)Spokes Wrote: This is something that's always been stuck in my head, but I've never run the numbers to see. If cutting fares increased ridership, would it not make sense to do so? Like if you cut $1million from fare rates, but the increased ridership generated $1million, wouldn't that be a win?
I guess they figure that there are some people that won't ride it no matter how cheap it is
My understanding of price elasticity is that an elasticity of 0.3 means that if fares were cut by $1M, there would be an increase in ridership that would generate about $300K. As long as elasticity is less than 1, fare increases will increase revenue, and fare cuts will decrease it.
This is of course what happens when you are not accounting for all the costs...
Lowering fares generates less fare revenue, but more ridership, that ridership has value above and beyond fare revenue.
Of course, the region has been reliable in ignoring those types of benefits (see the cancellation of hybrid buses)--this is only the most obvious problem with running a government "like a business".