Econometric modelling of competition between train ticket types.

Attempts were made in Great Britain in the 1990s to extend econometric models to examine competition between different types of ticket and to estimate elasticities specific to particular categories of ticket. Studies were conducted of commuting trips into London, where choices existed between traditional point-to-point rail season tickets and multi-modal but higher priced tickets, and of London based inter-urban trips, where travellers could choose between first class tickets and a range of standard class tickets which differed in terms of their time of travel restrictions and advance purchase requirements. These studies did not meet with a great deal of success. The cross elasticities were often statistically insignificant and in some cases were the wrong sign. A major contributory factor was the high degree of correlation between the fares of different tickets, largely due to the common practice of applying the same percentage fare increase to all tickets. A way forward is to harness relationships from economic theory, a procedure which has often been neglected in the empirical analysis of travel demand data. Two relationships of particular use are described in the paper. Both these relationships have been exploited to successfully estimate own and cross fare elasticities by ticket type as part of a system of demand equations. The technique of seemingly unrelated regression was used to estimate the system of equations, with the relevant constraints between elasticities imposed. Separate models have been estimated according to distance band for a large number of flows to and from London using annual data which covers the period 1990 to 1998. The system includes equations for the demand for first class tickets, the demand for standard class tickets with no restrictions on time of travel, and the demand for standard class with travel time restrictions. Advance purchase tickets are quota controlled and were dealt with using quantity cross-elasticities. This paper reports the developed models which, along with own and cross elasticities by ticket type, also provide separate income elasticities for each product. For the covering abstract see ITRD E126595.