Toying around with transit pricing

It's becoming increasingly clear that basic economic understanding of transit costing isn't widespread. It's more troubling that it's not just riders that share the problem, but officials too.

This letter to the editor from today's Post, "Metrorail Fairness" says:

I have never understood why Metro rewards its most reliable customers, the ones who use the system the most, by charging them higher fares. A more appropriate policy would be the reverse. Generally, Metro makes more money per passenger when a train is full, because trains have the same operating cost whether the cars are full or empty. So why charge those full-train passengers more? They should get a fare reduction, not an increase.

But this isn't true at all. To provide service to meet demands for riders during the peak commuting period, WMATA needs:

1. More trains
2. More train cars
3. More personnel
4. More electricity
5. Which is paid for at the highest daytime usage rate
6. And more post rush period cleaning.

The marginal cost of increased revenue from additional passengers isn't enough to cover these costs in and of themselves. (Union contracts and shift scheduling is another issue. So is the financing cost of having to purchase more train cars to satisfy peak demand.)

Hence, fare price differentials, which are also designed to level out usage periods to try to reduce overall operating costs.

The thing is, I wonder how much the president of the WMATA system, John Catoe, understands economics? According to this article in the Post, "Metro Drops Plan For Fare Increases,"

Catoe has set aside a complicated plan that would have raised bus and train fares and fees at suburban parking lots. Rush-hour commuters would have paid significantly more than off-peak riders, and those who use paper farecards and travel to 19 heavily used downtown stations would have paid even more.

Catoe said he shelved the proposal, which would have raised $64 million, because it didn't make sense to have such an uneven pricing system, especially because it was designed to charge daily commuters more than other riders.

Now I had serious reservations with the fare increases as proposed, but a pricing system that charges the users that force the greatest costs on the system is not uneven, but rather, appropriately priced.

This is a kind of marketing paradox, where your most loyal and dependable customers are also your most expensive and least profitable to serve.