Cost and time damping: evidence from aggregate rail direct demand models

Abstract

There is a significant body of evidence from both disaggregate choice modelling literature and practical travel demand forecasting that the responsiveness to cost and possibly to time diminishes with journey length. This has, in Britain at least, been termed ‘Cost Damping’, and is recognised in guidance issued by the UK Department for Transport. However, the consistency of the effect across modes and data types has not been established. Cost damping, if it exists, affects both the forecasting of demand and our understanding of behaviour. This paper aims to investigate the evidence for cost and time damping in rail demand using aggregate rail ticket sales data. The rail ticket sales data in Britain has, for many years, formed the basis of analysis of a wide range of impacts of rail demand. It records the number of tickets sold between station pairs, and it is generally felt to provide a reasonably accurate reflection of travel demand. However, the consistency of these direct demand models with choice modelling and highway demand model structures has not been investigated. Rail direct demand models estimated by ticket sales data indicate only slight variation in the fare elasticity with distance, as is evidenced in the largest meta-analysis of price elasticities conducted to date (Wardman in J Transp Econ Policy 48(3):367–384, 2014). This study of UK elasticities shows strong variation between urban and inter-urban trips, presumably a segmentation at least in part by purpose, but less remaining variation by trip length. A lack of variation by length supports the hypothesis of cost damping, because constant cost sensitivity would imply that fare elasticity would increase strongly with distance, because of the increasing impact of higher fares at longer distances. In this paper we indicate that rail direct demand models have some consistency of behavioural paradigm with utility based choice models used in highway planning. We go on to use rail demand data to estimate time and fare elasticities in the context of various cost damping functions. Our empirical contribution is to estimate time elasticities on a basis directly comparable with cost elasticities and to show that the phenomenon of cost damping is strongly present in ticket sales data. This finding implies that cost damping should be included in models intended for multimodal analysis, which may otherwise give incorrect predictions.