Do price reductions attract customers in urban public transport? A synthetic control approach

Abstract

In this paper, we assess the demand effects of lower public transport fares in Geneva, an urban area in Switzerland. Considering a unique sample based on transport companies' annual reports, we find that, when reducing the costs of annual season tickets, day tickets, and hourly tickets (by up to 29%, 6%, and 20%, respectively), demand increases over five years by about 10.6%. To the best of our knowledge, we are the first to show how the synthetic control method can be used to assess such (for policy-makers) important price reduction effects in urban public transport. Furthermore, we propose an aggregate metric that inherits changes in public transport supply (e.g., frequency increases) to assess these demand effects, namely passenger trips per vehicle kilometre. This metric helps us to isolate the impact of price reductions by ensuring that companies' supply changes do not affect estimators of interest.