Social Cost Pricing when Public Transport is an Option Value

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• Notes 1.It could also be made a function of other variables, like total traf? c levels. However, since the optimal fare should equalize marginal production costs, these can be seen as dependent only on the supply level s.
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• Suppose that local excess of demand occurs randomly in time and space.
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• This effect is not evident in (1).
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• The TRENEN model has been developed in the context of the research programmes Joule II and Transport of the DG XII, by a consortium which includes the Universities of Leuven (CES), Antwerp (SESO), Kent, Amsterdam (VUA), Athens (NTUA), Trinity College Dublin and the research consortium TREC (Italy).
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• The tree structure can easily be extended to account for any choice involved. For example, between departure times, between alternative technologies, or between alternative suppliers.
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• A cost function gives the minimum cost associated with a given utility level. If utility is expressed in monetary terms and the utility function exhibits constant returns to scale, a cost function can be interpreted as an ideal price index in which adjustments of demand patterns in response to changes in relative prices are determined endogenously.
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• Notice also that the distinction between private and public goods is irrelevant in the model version utilized here, because a single representative consumer is considered.
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• In principle, it would be possible to have a price for the ‘excess capacity’ differentiated between those who use the service and those who do not (Cameron and Englin, 1997). It is clear, however, that this is not ef? cient, because it would make the users pay a price exceeding the marginal cost of the service, for a given capacity level.
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• To keep the model simple, some modes (such as taxis, with a negligible market share) are not considered.
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• Each quantity index is obtained by applying an ordinary CES production function to lower level quantities.
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• Note: (a) reference prices for bus MT1 and bus services MT2 are different because of different estimation methods, (b) external costs for large and small cars are equal because available data do not allow the car type to be distinguished. Alternative data sources, however, generally show only marginal differences between the two types.
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