The Washington Area Metro Transit Authority struggles to balance its budget year in and year out. Metro periodically rolls out new pricing schemes in an attempt to balance its budget, and there is a new proposal on the table. Metro is considering increasing fares for rush-hour riders who exit Metro in the heavy trafficked business district in downtown Washington. Metro is trying to divide the market into two groups: business riders and non-business riders. With this new proposal up for consideration, Washingtonians have been speculating about the wisdom of metro's current fare rates. Recently, Dr. Gridlock addressed a reader's opinion in his column in the Washington Post. The reader suggested that Metro should eliminate its peak-load pricing scheme with higher rush-hour prices, and charge the rush-hour price all the time to try to increase profit. Dr. Gridlock makes a valid point in saying that the rush-hour customers are paying for a more-frequent service. While this is a true statement that Metro has higher costs during rush-hour because of a more frequent service, Metro's main justification for using peak-load pricing is more likely because the demand curve is more inelastic during rush-hour. Metro can make more profit by increasing fares during rush-hour, and offering lower fares during non-peak hours when demand is more elastic. The new proposal to use a pricing scheme with higher price for business riders will likely increase Metro's profit, or more accurately reduce its loss. The use of trip exit station for market division is a smart way for Metro to move towards a balanced budget. However, some people are concerned about this plan, including Dr. Gridlock. Dr. Gridlock suggests this new plan is unfair price gauging, that Metro rider's don't have a choice, "unlike the form of congestion pricing in which drivers get to pick between a free lane or a less crowded toll lane." But Metro riders do have a choice, they can drive or carpool among other options, and for many riders even with fare increases Metro is a better deal than the alternatives, and therefore riders will continue to ride Metro.
Posted by Adam, Amy, Braden, and Fabio
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment