Multimodal Transport Pricing: First Best, Second Best and Extensions to Non-motorized Transport

In this paper, we examine the main concepts of transport pricing in an urban environment, focusing on the automobile, public transport and walking or cycling as travel alternatives. A review of the literature on the first-best and second-best pricing policies is provided, with an emphasis on public transport pricing, including the setting of frequency and vehicle capacity, the influence of bus congestion externalities and the interactions between transport pricing reforms and the broader tax system. A model is developed to analyse the impact of non-motorized transport on optimal public transport pricing policy, congestion interactions between cars and buses associated with the transfer of passengers at bus stops and the existence of a capacity constraint within the public transport mode.