Man and his transport behaviour Part 4a. User response to price changes: application of the ‘threshold’ concept

Abstract

(1) The response of an individual consumer to change in such characteristics as price will be to change behaviour at a critical point, a ‘threshold’ at which a change of behaviour is perceived to be beneficial. (2) Most choices can be viewed as binary, for example, between pairs of transport modes. A cumulative normal distribution of responses will give an S‐shaped curve, the mid‐point being at the average threshold value. (3) An aggregate demand curve should show the response of a given group of people to a range of price changes at one point in time. Most curves derived from revealed behaviour do not permit this. To some extent, a demand curve must be derived from interviews and other tests, giving hypothetical behaviour. Such methods are used in non‐transport consumer tests, and work by Brög et al. gives a similar picture for transport users, supporting the concept of the S‐shaped curve. (4) Allowance for frequency of trip‐making modifies this picture, suggesting that a smoother curve may be appropriate for some conditions, such as non‐work trips. These approaches may be combined by use of catastrophe theory, with two control factors. The hysteresis effect is found around the threshold where repeated changes in the basic stimulus produce successively smaller responses. (5) There is some evidence of symmetrical response by public transport users to real increases and reductions in cash‐paid graduated fares, but this is not the case where different forms of pricing are involved. (6) An example of threshold effects in private transport may be found in the monitoring of tolls on the Itchen Bridge by Atkins. Demand became particularly sensitive to price in a certain range. (7) In the public transport field, there is similar evidence from the experience of introducing flat or zonal fares where graduated fares previously applied. Where travelcards are sold, the effect is much greater, and cases such as the West Midlands show little if any effect on sales despite real price increases. Here, trips are about 7% higher than would have been expected for the same revenue target, had graduated fares been retained. However, it may well be possible to exceed the threshold, especially where fares simplification and increases are combined, as the Trondheim experience suggests.