Could we pay travellers not to use over-crowded trains?

The John West technique: maximising carrying capacity on peak hour trains, Japan

If you think crowding of trains in Australia’s capital cities is bad, have a look at this extraordinary video of how they cram passengers onto trains in Japan! John West could learn a thing or two! Peak crowding is uncomfortable for passengers and increases operating costs – more capacity is needed to handle the peak, but much of it is unused in the off-peak period. That extra capacity might take many forms, such as more carriages, more trains, more staff, etc.

There could potentially be big savings if some of this peak demand were shifted to earlier or later periods. This applies to trains, buses and roads and indeed to many activities that experience peaking e.g. cinemas, concerts. Apart from the disincentive of being treated like a sardine, the standard approach is to charge a higher price in peak periods relative to the off-peak. However political constraints mean public transport operators in Australia tend to conceive of differential pricing as an off-peak concession rather than as an active way of managing peak demand.

Here’s another way of approaching this problem. The Economist reports Singapore is planning a pilot scheme offering public transport passengers a greater chance of winning a prize if they choose to go off-peak. All travellers are entered into a pool with a chance to win cash in weekly lotteries, but those who travel off-peak will effectively get three times as many ‘tickets’. The principle is that small rewards will pay for themselves in lower capital and operating costs.

The Economist quotes Stanford University academic, Balaji Prabhakar, who says lotteries rely on the behavioural-economics insight that the average person is risk-seeking when stakes are small:

Offer individuals 20p to leave the house an hour earlier, and most will say no. But a 1-in-50 chance of winning £10 may seem more enticing. The risk-seeking effect is amplified in small networks: regularly hearing about other winners leads individuals to overestimate their own chances of success.

The idea of carrots rather than sticks is not new. For example, long-standing readers might recall this proposal to reward drivers who don’t speed with a cash reward. Fines from speeders are paid into a pot and redistributed randomly as prizes to motorists who are ‘caught’ by speed cameras driving within the designated limit. The Capital Bikeshare scheme in Washington DC offers prizes to riders who travel against the dominant flow, thus reducing the cost of rebalancing the (geographical) distribution of bikes. This study of the effectiveness of a lottery in reducing car travel found it had a positive effect, although it disappeared when the lottery was stopped (note very small sample size). Read the rest of this entry »