Fare enough: A quantitative spatial transport model for transit pricing

Source abstract

Standard transport appraisal treats fare regulation in isolation, ignoring how price signals reshape urban geography. We bridge regulatory practice and quantitative spatial economics by constructing a Quantitative Spatial Transport Model (QSTM) for Greater Sydney, endogenising household and firm locations in response to transport shocks. Our framework extends the canonical quantitative spatial model by endogenising commuter mode choice and internalising network externalities through road congestion and the Mohring effect. Evaluating three public transport pricing interventions, including zero-fare, flat-fare, and fare-cap policies, we find that free transit is welfare-suboptimal, driven largely by operator revenue losses. In our setting, distance-based fares provide a spatial price signal that helps internalise resource costs and discourage sprawl, a signal that uniform flat fares mute. The model demonstrates that allocative efficiency requires a higher user contribution, revealing that weekly fare caps function as implicit subsidies for long-distance commuters. Higher fares trigger a spatial reorganisation where residents centralise to minimise commuting costs and firms decentralise to access labour. Ultimately, efficient distance-based pricing promotes a compact residential form, encourages polycentric employment, and reduces operator resource costs.