The Dynamics of Fare and Frequency Choice in Urban Transit

This paper investigates the choice of fare and service frequency by urban mass transit agencies. A more frequent service is costly to provide but is valued by riders due to reduced waiting times at stops, and faster operating speeds on less crowded vehicles. Empirical analyses in the 1980s found that service frequencies were too high in most of the cities studied. For a given budget constraint, social welfare could be improved by reducing service frequencies and using the money to lower saved fares. The cross-sectional nature of these analyses meant that researchers were unable to address the question of when and why the oversupply occurred. This paper seeks to answer that question by conducting a time series analysis of the bus operations of the Chicago Transit Authority from 1953 to 2005. The paper finds that it has always been the case that too much service frequency was provided at too high a fare. The imbalance between fares and service frequency became larger in the 1970s when the introduction of operating subsidies coincided with an increase in the unit cost of service provision.