ABSTRACT
The cost of extra passengers on a scheduled service, the marginal cost, is very low as a general rule, far less than the average cost. In pricing fares, there is thus an economic incentive to maximize the income of a public transport service, paying little attention to the costs of operation as this will be almost the same irrespective of how many passengers use it. To maximize income, a public transport operator may try to identify the fare which will produce the largest income, or may operate several fares on the same service, adjusted to what the operator sees as the ability or willingness of the targetted markets to pay. Thus students for example, often get discounted fares in an attempt to fill up, at above marginal cost, places which would otherwise be empty. This may also apply to discounts for the elderly, although in this case it is possible that many of their journeys are optional and so they will be more sensitive to price even if their income is not low by comparison with those of working age.
