The Effect of an Unconventional Fare Decrease on the Demand for Bus Journeys

We analyse the effect of a change in the fare structure for bus journeys in London on different demand measures using a regression discontinuity design. We utilise data obtained from Transport for London following the implementation of a new bus fare policy in September 2016, in which a follow-up journey made within the hour of an initial journey became free. Drawing on millions of individual paid and unpaid journeys, we estimate the effect of this price policy on the number of paid bus journeys, follow-up journeys and bus passenger numbers. We find that the policy significantly increased the number of bus trips by 5% and follow-up journeys by 8%. Passenger numbers increased by 4%. We also find that the increase in demand was not only driven by new customers, but also by more intensive demand by existing customers