In this article the existing transport prices in an average Belgian city are compared with optimal prices that take into account the external transport use costs. In the basic optimum there are no restrictions on pricing and no budget constraints for public transport. The optimum is considered under a number of restrictions and compared with the basic optimum. The following exercises are considered: (a) the impossibility of a price differentiation between peak and off peak car use; (b) a maximum price for public transport; (c) the incorporation of a budget restriction for public transport which states that its deficit should be reduced by 50% in relation to the initial equilibrium; and (d) the implications of a fixed supply and (d) the implications of a fixed supply of public transport in off peak periods. It is shown that in all cases prices of peak transport should increase considerably. Extra subsidies for public transport may be justified, if it is impossible to ask price peak and off peak car travel differently. However, reducing the deficit of public transport, requires an increase of both public transport prices and car prices. (A)
Abstract