Profit maximization

This is a more subtle version of maximizing the benefit to the operator through pricing marginal services to yield at their marginal cost of production. In this manner, off-peak services may be offered at concessionary fares down to the point where the resultant yield from utilizing spare capacity provides no net financial benefit to the operator.

This approach may also be followed as a rational response by a formal operator to competition from the informal sector. Taking advantage of his lower marginal unit cost of production, fares can be offered at a level that the informal operators cannot sustain. The informal sector is thus largely restricted to peak-hour services, and provides the additional capacity at such times that would otherwise be expensive for the formal operator to provide.

In a competitive market, though, increasing profit may not necessarily arise from raising fares either because the service becomes unaffordable to its potential patrons, who will then divert to any alternatives, or because the profits earned attract new market entrants who act to drive down prices. This latter dynamic is most likely on corridors of high travel demand, as noted above, but is less effective in areas of low travel demand.