The effects of social norms and price changes on public transport demand: empirical evidence from London

Demand for public transport in cities has been and is projected to increase, putting existing transport networks under increasing strain. It is therefore important to investigate different means of managing public transport demand and one of such means is through the price mechanism; policy makers need to know how demand might respond to changes in fares. This thesis begins by first exploring the presence of and the causes for asymmetric price elasticities of demand using transport demand data from London Underground and employing regression methods. This research finds that public transport demand is more sensitive to fare increases than to decreases; this is majorly due to loss aversion, at least on the intensive margin of demand. But how does public transport demand respond to a nominal decrease in fares? This thesis next analyse the effect of a change in the fare structure for bus journeys in London on different demand measures using a regression discontinuity design, following Transport for London‘s implementation of a new bus price policy in September 2016. The analyses show that the policy significantly increased the number of bus trips by 5% and follow-up journeys by 8%. Passenger numbers increased by 4%. The results show that the increase in demand was not only driven by new customers, but also by more intensive demand by existing customers. Price manipulations affect the cost functions of both the transport provider and passengers. This thesis finally proposes an alternative and less costly measure of managing public transport demand. Nudging passengers to behave in certain ways through the creation of a salient social norm has the potential to be a cost-effective mechanism to manage transport demand. Transport for London implemented in 2017 an experiment on one of its busiest metro train platforms. Using Difference-in-Differences method and different sets of assumptions about what the counterfactual change in waiting and delay times would have been in the absence of the intervention, this thesis analyses the effect of such intervention on dwell time and, by extension, the capacity to manage demand