CHAPTER 26 - ESTIMATING NORMATIVE AND POSITIVE PRICES FOR BUS AND UNDERGROUND IN LONDON

Abstract

This chapter discusses the estimation of normative and positive prices for bus and underground services in London. The negativity of the matrix of substitution effects cannot be imposed by restrictions of the parameters and must be tested a posteriori. The price variables are the average fares per passenger mile, the traffic price index, and the retail price index. Income is measured by a time series of disposable income. The high elasticities result from applying annual rather than weekly data, contrary to London Transport's own demand estimations. On the basis of the Marshallian demand functions, the Hicksian demand functions can be computed. The number of place miles per passenger mile is the load factor. The actual costs of London Transport are well approximated by the translog factor input functions.