Incorporating Reference-Dependent Into A Study Of Rail Transit Ticket Price Elasticity

Rail transit ticket price formulation is an important subject of rail transit development. Beijing has been implemented the low price strategy of2yuan flat fare since October7th,2007. It reduces the travelers’ financial burden, attracts passenger flow, but however, the government subsidies have been increasing. Does low fare compliance with travelers’ expectation? If the current ticket price is higher than their expectation, it means the ticket price is less attractive and the guidance is not enough; whereas the current ticket price is too much lower than expected, not only the increasing attraction is limited, but also it reduces the rail transit due income and increases the burden of government. In addition, the current flat fare neglects the bearing capability differences between travelers. So it’s necessary to distinguish travelers’ level, study the ticket price expectation for each level, in order to providing suggestions to ticket price formulation.From behavioral economics perspective, travelers’ ticket price expectation is a reference point. This paper introduces reference-dependent principle of prospect theory into the study of rail transit ticket price elasticity, analyzes the relationship between reference-dependent and ticket price elasticity, illustrates the characteristics of rail transit reference price, establishes a ticket price elasticity model incorporating reference price and gives the judgment basis of reference price. Beijing travelers’ expected ticket prices in both flat fare and different distances of metered fare policy are calculated, and applicable fare policy suggestions are given in this paper.This paper has two innovations points:(1) Introducing behavioral economics theory into the analysis of rail transit ticket price elasticity, enriching the study in this field;(2) Most of the current literatures judge loss aversion on the basis of a determined reference point, it ignores the heterogeneity of the reference point to some extent. This paper is a kind of reverse application, judges the reference point position according to the extent of loss aversion, and obtains expected rail transit ticket price for both whole and each level.The main conclusions of this paper are drawn as below:(1) Reference-dependent reflects travelers’ expected ticket price and the resulting metal feelings, whereas rail transit ticket price represents the accomplished fact of travelers’ decisions, this two exist causality to a certain degree;(2) Loss aversion leads to the phenomenon of asymmetric ticket price elasticity, and the extent of asymmetric elasticity reaches maximum at wave crest of group reference price;(3) Rail transit reference ticket price is multidimensional reference-dependent and comprehensively reflected in price dimension;(4) Reference price exists heterogeneity;(5) Most travelers’ reference ticket prices in most cases are a little higher than the current price, it indicates that Beijing rail transit ticket price has a certain up space, but the space is not large;(6) Rail transit reference prices are different for different permanent residences, income levels and travel distances, distinguished ticket price based on travelers’ type can be formulated, and also the metered fare policy is feasible in Beijing;(7)The metered fare policy considering income levels is a applicable adjustment direction for Beijing rail transit, it’s also advisable to raise ticket price for some people.