Modal Shift Effects of a Delay Insurance Transit Fare Scheme

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Abstract
Travel time unreliability in public transport (PT) reduces user satisfaction, increases costs, and leads to revenue loss. Integrating pricing strategies with multi-modal development offers promising solutions to mitigate the adverse impacts of delays. This study extends the ”premium fare with delay insurance” concept, where passengers can choose to pay a surcharge that guarantees free access to alternative services if delays exceed a set threshold. We incorporate the demand change triggered by the introduction of the premium fare to an earlier version of the model. The model assumes that some users are captive to their current choice whereas some users of other travel modes may shift to the PT system in response to the availability of this new fare product. We hence utilize a dogit model formulation and apply it to the Washington DC metro with empirical delay and demand data. The model optimizes premium fare pricing to maximize operator profit while accounting for user behavior and compensation costs. The mean optimal premium fare level across all OD pairs is found to be around $4.35 compared to $2.52 for a standard ticket, with the delay qualifying threshold set at 5 minutes. The optimal fare levels are primarily driven by delay severity, distance and geographical characteristics. They vary across loyalty scenarios, with slightly lower mean optimal fares emerging when cross-mode demand response is considered. The results show that introducing premium tickets improves operator profitability and reduces passenger generalized travel costs, particularly by lowering travel time costs through induced mode shifts.

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