A new proposal for fare differentiation for the Integrated Time Ticket in the city of Rome

Abstract

The purpose of this work is to assess the possibility for the Rome city council and ATAC, the company which manages Local Public Transport (LPT) in the capital, to introduce a fare differentiation for the Integrated Time-Ticket (ITT), meaning by this the definition of two distinct fares for the ticket in question, one referring to the peak time and the other to the soft off peak time. These fare schemes are very widespread in other European countries, but also in Italy this approach to the redesign of fare offers is gaining ground; in fact, even in Milan there are already monthly and annual subscriptions (facilitated for over 65s) that are valid only in specific "off peak" time slots). The theoretical concept underlying the fare discrimination is rooted in the microeconomic theory relating to the possibility for the monopolist, who knows the function of demand of the market (or markets) of his interest, to be able to offer goods and services at different prices, depending on the band of users concerned, depending on the different elasticity of demand at the price. In this study, the possible effects of the abovementioned price differentiation are quantified economically by estimating appropriate demand elasticities; in this way, it can be demonstrated, under specific assumptions, that differentiating the price of ATAC tickets can increase revenues from ticket sales and, at the same time, sell more tickets.