Fare pricing differentiation

The fare authorized for a specific journey may vary in relation to a number of other parameters. Practices that have been identified are:

Variation by travel time or day

Many urban passenger transport systems offer discounted travel outside the periods of peak demand, or sometimes for any travel after the morning peak; concessionary fares may also only be valid at such times. Similarly travel at the weekend or on public holidays may be offered at a lower price, or special offers be made for group travel at these times.

In such cases, the intention is to generate sufficient extra patronage through utilizing any spare capacity so as to increase total revenues without adding significantly to costs. Services can be priced against their marginal cost of production, as the fixed costs of the system need to be recovered from the peak operation that defines their scale.

Variation by speed of travel

Some systems differentiate fares by the speed of travel, often seeking to capture the value that a passenger receives from a faster service in a capital-intensive mode. This practice may even be applied within a mode, with express or limited-stop services being charged at a higher rate than stage-carriage services.

It should be noted that passengers are generally willing to pay for a faster service, recognizing the value of the time that this saves, but the operator also benefits from the lower production cost arising from greater labor and asset productivity. It is therefore prudent for an authority to put in place a mechanism to capture these twin benefits through the route tendering process, rather than to allow them to accrue to the respective parties and be lost to the system.

Variation by standard of service

Some urban passenger transport systems charge different fares according to the standard of the service provided, for example for air-conditioned buses or seated-only carriage where these are not the norm within the network.

Evidence shows that some passengers appreciate this ability to differentiate their travel, and are willing to pay significant premiums to achieve that objective. Surpluses earned from such services can be used to support basic travel provision at more affordable fares.

Variation by method of payment

Some urban passenger transport systems offer cheaper travel for payment by their preferred modalities, such as pre-paid stored-value cards. This reflects the benefit to the system of lower sales administration costs and reduced working capital.

However such policies can adversely impact the poor, who may not be able to afford the sums involved in participation (the card, and its pre-payment) or to commit to specific future travel (irregular pattern, with decisions taken according to funds availability). Where cash alternatives to card payment have been mandated, migration to the former has been very significant.

Variation by nature of passenger

These, and other fare concessions, will be examined in the following section.