Distributional Bias in the Welfare Pricing of Public Transport Service

Recently the problem of transit pricing has taken the form of an operational programming model. One can see this tendency by comparing the clear-cut discussions by Marchand (1968) or Sherman (1971) with the rather clumsy treatment of a similar subject by Rees (1968). In particular Sherman analyzed the pricing problem between two urban transit modes private automobiles and public buses—which were mutually substitutable in consumption and also mutually interdependent in production through congestion effect. His model is fairly general and can deal equally well with the situations of peak traffic or off-peak traffic. As a programming model, it includes the aspect of income redistribution by one set of instrumental variables, so that it can be considered as an attempt at synthesizing the problems of welfare pricing and compensatory income redistribution.