The app or the cap? Which fare innovation affects bus ridership?

Abstract

Technology advancements in the last two decades have changed several aspects of public transit service, particularly related to fares. Transit agencies seek to benefit from new technologies to improve the customer experience by launching mobile fare payment applications (“apps”) and adopting more sophisticated fare policies such as fare capping (“caps”). However, there is a limited understanding of the impacts of these two fare innovations on bus ridership. Therefore, this study seeks to quantify the impacts of mobile fare payment applications and fare capping policies (both daily and monthly) on bus ridership. Staggered difference-in-difference techniques were used to evaluate system-level bus ridership for the 50 largest transit agencies in the United States. This approach considers the effect on multiple treated units that adopted apps or caps at different times; it also considers heterogeneity of the treatment effect between treated agencies and over time. The results suggest that the launch of mobile fare payment applications and the adoption of daily fare capping policies did not have significant impacts on system-level ridership. On the other hand, monthly fare capping policies were associated with significant ridership gains. Transit systems that adopted monthly fare capping policies for more than one year experienced an average increase in annual bus ridership ranging from 3.6% to 4.1%; these results were heterogenous and increased over time. These findings can help to inform transit agencies across the United States as they consider different strategies to increase ridership and reverse recent bus ridership declines. Perhaps most important, the staggered difference-in-difference methodology used in this study could potentially be applied to evaluate a wide range of transportation technology and policy innovations with staggered (gradual) rollouts.