Monday, March 23, 2009
Public transport overcrowding 2
One strategy to reduce overcrowding on trains was discussed in today's Applied Microeconomics honours class - limit the use of 60 plus concession fares to non-peak times. While unrestricted fares may improve social welfare when trains are underutilized (the basic idea being that price discrimination improves social welfare if total consumption increases), they clearly do not where trains are full. In this case, commuters with higher willingnesses to pay than those on concession fares may be displaced. In a Kaldor-Hicks sense, introducing time restricted concession fares may result in an increase in efficiency.