TRAVEL DISTANCE AND OPTIMAL TRANSPORT POLICY

This paper develops a theoretical model to deduce optimal fare and supply schemes for a transport operator, with a special focus on how fares and quality of supply should vary with travel distance. The transport operator\u27s emphasis on profit versus consumer surplus is also considered in the model. Under reasonable assumptions imposed on the actual functions, findings show that the more weight the operator attaches to profit, the higher the fare level and the higher the generalized travel costs. How the operator\u27s objectives influence the quality of transport and how traveling distance influences fares, quality of transport and generalized travel costs, are ambiguous with relation to the starting restrictions placed on the actual functions. The paper then discusses the special case in which the quality of transport is exogenous to the transport operator. One important result is that higher demands set to the transport operator regarding the quality of the transport supply do not necessarily reduce the transport users\u27 generalized travel costs. A survey of empirical studies from Norway seems to confirm the model\u27s results