One factor that might mitigate the affect of an increase is that many federal employees have their fares paid for by the government. This is the result of a program that is intended to reduce car rides and thus decrease air pollution.
One might take this move by Metro, then, as an attempt to get a back-door subsidy.
CC
· 3 years ago
Another factor that needs to be considered here (and in other cases as well) is the current supply capacity/quantity of the service. If demand is already much less that 100% (say 50%) of available supply/capacity, that should already tell them something about (current) pricing (yeah...I know...these aren't business people). They could (potentially) decrease rates and see an aggregate increase in revenue.
Often times I find that current demand/supply/capacity/utilization is never considered.
For example Democrats in congress now desire to enable more people to go to college by lowering student loan rates and providing more grants to students. But if colleges are already generally full (and given the costs of college, one could assume this to be the case)...they will simply end up with more demand chasing the same amount of supply...thus...wait for it...causing colleges to actually increase the cost of getting in (directly or indirectly) making it harder to get in! Oops.
Lenny
· 3 years ago
As you say, talk is cheap. If the demand is predicted based on how people respond to reporters then I wouldn't put much value on that prediction.
It sounds as if demand is pretty high - at least during rush hour so differential pricing makes sense.
What's the chance that they're smarter than they appear; i.e. if they can get the approval for a high base rate then they can offer all sorts of discounts as a way of adjusting prices in response to demand. Otherwise they're stuck with a price that can't be adjusted without the politicians approval.
Adam Malone
· 3 years ago
This makes me wonder if they have considered the possibility that people are already offsetting their ride times as much as possible. I mean we have rush hour traffic for a reason, most jobs start within a culturally acceptable time frame and end at another culturally accepted time.
The subway system already has fare differentiations. Rush hour vs. offpeak prices are sometimes 2:1.
It is likely that No matter the change in price that occurs offsetting rush hour more riders will be nearly impossible.
When I was in DC in the Spring I was there to sight see, so I could ride when I felt it convenient. As a result I rode in the off peak hours because it was cheaper. But I did notice that peak hours were defined so broadly that it was unlikely that many workers could/would use it as an excuse to ride later.
Matt C.
· 3 years ago
There other factors that also must be taken into consideration when talking about the Metro, especially around DC. For example I work near Union station, but I live 10 mins south of Baltimore. My wife works in Arlington. We both take the MARC train into work.
First it would be interesting to see if that will impact the ridership of MARC/VRE commuter rails and decrease the ridership on the outer spokes of the Metro.
Secondly, the current gas prices still make it much better to take the transit system. It also takes away the hassle of sitting in traffic, this is the main reason my wife rides both the MARC and takes the METRO out to Arlington.
I have always believed that both commuter rails and the Metro system should be privatized. Just as Dr. Roberts suggest it would allow companies to compete for ridership. For example, rather than traditional rail companies could operate maglev or monorail systems. If the green line is owned by one company and the Red line a different company, if one were to offer better prices, better service, they would do much better. Those same companies might offer buses to other parts of the city where they don't run lines. It would be difficult to set up a system similar to the smart trip where it debits the dollar amount and is then sent to clearinghouse to the appropriate vendor.
My two cents.
Christopher
· 3 years ago
I'm from the DC area, and have been reading about this a lot the last couple days.
As you said, talk is cheap. I bet that Metro fares are fairly inelastic: not many people will jump ship.
Also, Metro had a choice to make: up fares, to pay for the trains they run, or leave fares and cut service. The cries now, however loud they may be, are nothing compared to when Metro experimented with less trains back a few months ago.
Bill Nelson
· 3 years ago
Metro's revenues are negative, as they require subsidies to run the trains. Therefore, if they want to maximize revenue, they should increase the fare to $10,000 to eliminate all ridership, which would thereby raise their revenue to zero.
Jasper
· 3 years ago
******* "I wonder if the Metro even considered the likelihood of a reduction in ridership in response to a fare increase." *******
Surely a large organization like the public transit authority in D.C. would have a few economists or analysts in its employ. No?
Lowcountryjoe
· 3 years ago
Do mass transportation riders consider the alternatives of not riding as they complain loudly. Car payment, insurance premiums, refueling, and maintainance cost...let's see them do better. In fact, I'd say if mass tranportation riders aren't already shelling out at least one quarter of what most car owners do in car upkeep costs -- in order to be a passanger -- then they have no business expecting sympathy to their complaints.
false_cause
· 3 years ago
To Lowcountryjoe,
I believe a great number of the people who use the Metro to commute to work do already own cars. With that in mind... from my station, a $2.10 increase in fares would make a rush-hour round-trip ride to Union Station cost $9.20. We're getting mighty close to covering everything including feeding a meter.
Lowcountryjoe
· 3 years ago
Good! I really think that $10 a day for 20-22 working days seems about 'fare'...even if the amount is much higher than what I thought it might be.
bartman
· 3 years ago
Uh, Bill, revenues can't be negative. Of course, operating costs may be greater than revenue, thus causing profit (or for a non-profit, operating surplus) to be negative.
Anyway, the cost/benefit calculations for something like the Metro go beyond the revenues. Reducing traffic congestion is worth a great deal to the region.
I'm willing to bet that someone, somewhere in the Metro has at least tried to estimate the price elasticity of demand.
Adam Malone
· 3 years ago
Christopher-
You forgot a third choice...reduce the price of fares leading to an increase in revenue.
On the surface it is counter-intuitive but it has been proven over, and over.
For example Bush has systematically lowered taxes (yes many were focused on tax breaks for the wealthy) while tax revenues have increased steadily.
Lower prices do not necessarily equal lower revenue.
Google "Laffer Curve" and see what you come up with.
True_Liberal
· 3 years ago
Good golly, Adam, you mean the Laffer Curve applies to the Metro? I thought the all-wise Left debunked that 20+ years ago!
Half Sigma
· 3 years ago
Metro fares are surely very inelastic.
But when I lived there, I never rode it to work because of the exurbanization of the DC area. The Metro only works if you work in DC, but all the jobs were in stupid places like Tyson's Corner and the place with the big I-395 highway interchange.
JohnDewey
· 3 years ago
"But when I lived there, I never rode it to work because of the exurbanization of the DC area."
That's why trains will not work in any modern city - not in DC or Dallas or Denver or Phoenix or anywhere else. Trains are a 19th century, pre-automobile "solution" to a problem that no longer exists. I'm amazed that suburban voters are so naive in believing these hub and spoke networks, designed to save decaying center cities, will help their commute from suburban home to suburban job.
All Comments
Dr. Roberts,
One factor that might mitigate the affect of an increase is that many federal employees have their fares paid for by the government. This is the result of a program that is intended to reduce car rides and thus decrease air pollution.
One might take this move by Metro, then, as an attempt to get a back-door subsidy.
Another factor that needs to be considered here (and in other cases as well) is the current supply capacity/quantity of the service. If demand is already much less that 100% (say 50%) of available supply/capacity, that should already tell them something about (current) pricing (yeah...I know...these aren't business people). They could (potentially) decrease rates and see an aggregate increase in revenue.
Often times I find that current demand/supply/capacity/utilization is never considered.
For example Democrats in congress now desire to enable more people to go to college by lowering student loan rates and providing more grants to students. But if colleges are already generally full (and given the costs of college, one could assume this to be the case)...they will simply end up with more demand chasing the same amount of supply...thus...wait for it...causing colleges to actually increase the cost of getting in (directly or indirectly) making it harder to get in! Oops.
As you say, talk is cheap. If the demand is predicted based on how people respond to reporters then I wouldn't put much value on that prediction.
It sounds as if demand is pretty high - at least during rush hour so differential pricing makes sense.
What's the chance that they're smarter than they appear; i.e. if they can get the approval for a high base rate then they can offer all sorts of discounts as a way of adjusting prices in response to demand. Otherwise they're stuck with a price that can't be adjusted without the politicians approval.
This makes me wonder if they have considered the possibility that people are already offsetting their ride times as much as possible. I mean we have rush hour traffic for a reason, most jobs start within a culturally acceptable time frame and end at another culturally accepted time.
The subway system already has fare differentiations. Rush hour vs. offpeak prices are sometimes 2:1.
It is likely that No matter the change in price that occurs offsetting rush hour more riders will be nearly impossible.
When I was in DC in the Spring I was there to sight see, so I could ride when I felt it convenient. As a result I rode in the off peak hours because it was cheaper. But I did notice that peak hours were defined so broadly that it was unlikely that many workers could/would use it as an excuse to ride later.
There other factors that also must be taken into consideration when talking about the Metro, especially around DC. For example I work near Union station, but I live 10 mins south of Baltimore. My wife works in Arlington. We both take the MARC train into work.
First it would be interesting to see if that will impact the ridership of MARC/VRE commuter rails and decrease the ridership on the outer spokes of the Metro.
Secondly, the current gas prices still make it much better to take the transit system. It also takes away the hassle of sitting in traffic, this is the main reason my wife rides both the MARC and takes the METRO out to Arlington.
I have always believed that both commuter rails and the Metro system should be privatized. Just as Dr. Roberts suggest it would allow companies to compete for ridership. For example, rather than traditional rail companies could operate maglev or monorail systems. If the green line is owned by one company and the Red line a different company, if one were to offer better prices, better service, they would do much better. Those same companies might offer buses to other parts of the city where they don't run lines. It would be difficult to set up a system similar to the smart trip where it debits the dollar amount and is then sent to clearinghouse to the appropriate vendor.
My two cents.
I'm from the DC area, and have been reading about this a lot the last couple days.
As you said, talk is cheap. I bet that Metro fares are fairly inelastic: not many people will jump ship.
Also, Metro had a choice to make: up fares, to pay for the trains they run, or leave fares and cut service. The cries now, however loud they may be, are nothing compared to when Metro experimented with less trains back a few months ago.
Metro's revenues are negative, as they require subsidies to run the trains. Therefore, if they want to maximize revenue, they should increase the fare to $10,000 to eliminate all ridership, which would thereby raise their revenue to zero.
******* "I wonder if the Metro even considered the likelihood of a reduction in ridership in response to a fare increase." *******
Surely a large organization like the public transit authority in D.C. would have a few economists or analysts in its employ. No?
Do mass transportation riders consider the alternatives of not riding as they complain loudly. Car payment, insurance premiums, refueling, and maintainance cost...let's see them do better. In fact, I'd say if mass tranportation riders aren't already shelling out at least one quarter of what most car owners do in car upkeep costs -- in order to be a passanger -- then they have no business expecting sympathy to their complaints.
To Lowcountryjoe,
I believe a great number of the people who use the Metro to commute to work do already own cars. With that in mind... from my station, a $2.10 increase in fares would make a rush-hour round-trip ride to Union Station cost $9.20. We're getting mighty close to covering everything including feeding a meter.
Good! I really think that $10 a day for 20-22 working days seems about 'fare'...even if the amount is much higher than what I thought it might be.
Uh, Bill, revenues can't be negative. Of course, operating costs may be greater than revenue, thus causing profit (or for a non-profit, operating surplus) to be negative.
Anyway, the cost/benefit calculations for something like the Metro go beyond the revenues. Reducing traffic congestion is worth a great deal to the region.
I'm willing to bet that someone, somewhere in the Metro has at least tried to estimate the price elasticity of demand.
Christopher-
You forgot a third choice...reduce the price of fares leading to an increase in revenue.
On the surface it is counter-intuitive but it has been proven over, and over.
For example Bush has systematically lowered taxes (yes many were focused on tax breaks for the wealthy) while tax revenues have increased steadily.
Lower prices do not necessarily equal lower revenue.
Google "Laffer Curve" and see what you come up with.
Good golly, Adam, you mean the Laffer Curve applies to the Metro? I thought the all-wise Left debunked that 20+ years ago!
Metro fares are surely very inelastic.
But when I lived there, I never rode it to work because of the exurbanization of the DC area. The Metro only works if you work in DC, but all the jobs were in stupid places like Tyson's Corner and the place with the big I-395 highway interchange.
"But when I lived there, I never rode it to work because of the exurbanization of the DC area."
That's why trains will not work in any modern city - not in DC or Dallas or Denver or Phoenix or anywhere else. Trains are a 19th century, pre-automobile "solution" to a problem that no longer exists. I'm amazed that suburban voters are so naive in believing these hub and spoke networks, designed to save decaying center cities, will help their commute from suburban home to suburban job.