Metropolitan Atlanta Rapid Transit Authority Fare Elasticity Model

Abstract

The introduction of a variety of fare media has increased riders’ choices of how to pay for transit and has provided transit agencies with the ability to price fare media differently. An aggregate elasticity value such as the Simpson-Curtin formula provides cannot capture the shifts among fare media, and elasticities for specific fare payment categories do not directly address these shifts. The Metropolitan Atlanta Rapid Transit Authority (MARTA) fare elasticity model was developed to identify shifts among fare payment methods and to forecast ridership and revenue changes resulting from a fare change. The key element in predicting shifts among fare media is the identification of the propensity of riders to choose one fare medium over another even if their prices are identical. After current ridership is adjusted to take account of these shifts, fare elasticities are then applied to predict post-fare-change ridership levels by fare payment method. The new ridership figures are used to forecast new revenue. The model requires minimal input from the user, primarily current ridership by fare payment mode and current and proposed fare levels. Elasticities can also be changed by the user to test the sensitivity of the elasticity assumptions, and factors such as the intensity of weekly and monthly TransCard use are additional input options. The model has proved to be very accurate when applied to the most recent MARTA fare change on July 1, 1995, predicting overall ridership within 0.05 percent and revenue within 0.7 percent. A model enhancement allows the user to recalibrate the model after any future fare changes by testing the accuracy of different elasticity assumptions.