Fare pricing elasticity, subsidies and the demand for vanpool services

Transportation demand management practitioners consider pricing a crucial determinant of vanpool market demand. Publicly sponsored programs stress the significance of fare pricing and subsidies as key tools for increasing ridership. This paper investigates the effects of fares and fare subsidies on the demand for vanpool services. Using employer and employee data from the 1999 survey of the Commute Trip Reduction (CTR) program of the Puget Sound region (Washington), a conditional discrete choice model is built to analyze the choice of vanpool services with respect to competing means of transportation as a function of various socioeconomic characteristics. The predicted value of the direct elasticity is -0.73, indicating that vanpool demand is relatively inelastic with respect to fare changes. For trips below 30 miles, the individual elasticities are equivalent to the aggregate estimate. As the distance from home to work increases beyond 60 miles, individuals are less responsive to price changes. Subsidies have a relevant impact in increasing ridesharing, controlling for firm size and industry sector. Whenever employees are offered a subsidy, the predicted probability of choosing vanpool more than doubles. When considered in the context of subsidies, these results support the evidence that policies other than those intended to directly affect fare pricing, could play a relevant role in stimulating ridership.