Relative Price of Travel

If I tell someone in Pune that you would require to pay 30% more for a bus ride to Mumbai than driving his or her own car on the beautiful expressway, I will be written off as a jerk! And here I am, doing exactly the same thing when I ride the Bonanza Lines to NY City from Storrs.

Let me back up with some figures. NY City is around 145 miles from Storrs. On an average I would have to pay $60 for a round trip ticket on a bus. Whereas if I drive a car with 30 mpg yield I require 10 gallons of gas costing around $30. Add a toll of $5 and the total comes to $35. If the mileage drops then the cost will go up. However, I am assuming that by now we are sane enough to realize that the Japanese are better at making cars! So there it is. I actually pay more than 30% for a bus ride than a ride in a car. In India, a bus ride will cost me less than half of what it would cost to drive a car for the given distance.

This is one of the many conundrums that intrigue me when I compare things back home with that in US. So the million dollar question is how de we reason out this seeming anomaly. Riding a public or a shared vehicle should cost me less than the fancy ride in ones own air-conditioned car. There are economies of scale when it comes to public transport and hence should be cheaper. At least in India that’s hard nosed common sense. But it turns out that common sense is after all indeed not common. It is context specific.

One needs to pry a bit deeper to see the contextual reason in this. An important factor is of course competition. If I take the case of market for travel from Pune to Mumbai (approximately 110 miles apart form each other) there is much more competition than in the market for travel between Storrs to NY city. You have the State rail and road transport, a multitude of private bus operators, cab service and so on. There is a range of service available depending on how deep you want to go in your pockets. This is certainly not the case here. You have a lone Bonanza or Greyhound providing public intercity transportation or you are on your own.

Is this monopoly enough to generate such opposing differentials? May or may not be. However, one can certainly think of some additional factors.

For e.g. owning a car is a much common thing in US than it is in India. People can also afford to place much more value on time and convenience. So a person riding a bus constitutes an anomaly in US. He or she will be charged more exactly for being that and constituting an inelastic demand. This is certainly not the case in India.

For a variety of reasons owning a car is not as common as in US and driving longer distances is even less so. Hence a person choosing to ride a bus is not an anomaly. He is not relatively disadvantaged because he does not have an access to a car ride. It’s a common way of travelling and being relatively poor, people tend to place a lower value on time and convenience.

The cheaper state transport in India also works well to keep the market competitively priced. The presence of the state probably works as in the contestable markets theory.

Can think of any more factors? As they say, take your pick!

6 Comments

Filed under India-US: Some Conundrums

6 responses to “Relative Price of Travel

  1. Rhucha

    We had a reat discussion about public transporation in one of my classes and a transportation expert told that in case of bus transport , peopl do not prefer it because they are not ready to pass through areas where the bus goes. Most of the people find bus trasport as inferior good if you might say . They do not wish to transport along with people from lower socioeconomic class. But for them light rails or subways are better suited to their prferences. Now another thought that was sought in the same class about very less public transport in western US. Now according to my professor, having thick netwrok of public transport as in NY or PA menas having more densed cities ,as in the same states. SO people in AZ or CA do not desire their cities to be like NY or Chicago… Well I dont know if this really anwers the question. But I think density of population might be a way of thinking about having more public trasport. What do you say?

  2. Rhucha

    We had a reat discussion about public transporation in one of my classes and a transportation expert told that in case of bus transport , peopl do not prefer it because they are not ready to pass through areas where the bus goes. Most of the people find bus trasport as inferior good if you might say . They do not wish to transport along with people from lower socioeconomic class. But for them light rails or subways are better suited to their prferences. Now another thought that was sought in the same class about very less public transport in western US. Now according to my professor, having thick netwrok of public transport as in NY or PA menas having more densed cities ,as in the same states. SO people in AZ or CA do not desire their cities to be like NY or Chicago… Well I dont know if this really anwers the question. But I think density of population might be a way of thinking about having more public trasport. What do you say?

  3. Parag Waknis

    Interesting points Rhucha. Actually, while in India, when I was thinking of how to travel between NY and Storrs, my friends ridiculed when I said I would do so by Greyhound. They had a much parochial class preference for the kind of transprtation they wanted me to use for the purpose.

    To be fair, when I talk about car travel being cheaper than a bus ride, i sort of gloss over the fact that it is the conditional cost I am talking about. Given that you already own a car, it would be cheaper to drive than ride a bus. So people are actually penalised for not having a car.

    Becasue people value being differentiated from the crowd, the higher relative price of a bus actually mocks at you for not having an access to a car. Its like saying becasue you are poor you will pay more. Its regressive!

    As for the intra city transport is concerned, cities like NY have created a good incentive structure for not traveling by a car within city.

  4. Parag Waknis

    Interesting points Rhucha. Actually, while in India, when I was thinking of how to travel between NY and Storrs, my friends ridiculed when I said I would do so by Greyhound. They had a much parochial class preference for the kind of transprtation they wanted me to use for the purpose.

    To be fair, when I talk about car travel being cheaper than a bus ride, i sort of gloss over the fact that it is the conditional cost I am talking about. Given that you already own a car, it would be cheaper to drive than ride a bus. So people are actually penalised for not having a car.

    Becasue people value being differentiated from the crowd, the higher relative price of a bus actually mocks at you for not having an access to a car. Its like saying becasue you are poor you will pay more. Its regressive!

    As for the intra city transport is concerned, cities like NY have created a good incentive structure for not traveling by a car within city.

  5. sava

    I’m a little late in getting to your blog, but that’s your fault – you never told me!! D mentioned it and I found it =) so I’m catching up on all the reading and even though it might not make as much difference, I’m going to comment anyway!

    of course, my perspectives are very far removed from the point of view of economists or the very dangerous breed of amateur economists 😉 but hopefully it makes a difference! unfortunately, I don’t have any data to back-up what I say, but I’ll leave that to you!

    when comparing bus and car, I think one factor you may have left out is the green factor. what is the cost to the environment (which is still a cost!) when driving a car as compared to a bus? can that be factored into the overall cost of driving versus bussing?

    today, people are often encouraged to take buses rather than cars, can the trend change? BUT, it is important to note that most of the ‘take the bus not the car’ campaigns are urban and refer to local transportation rather than long-distance transport.

    just thoughts… musings, if you will =)

  6. sava

    I’m a little late in getting to your blog, but that’s your fault – you never told me!! D mentioned it and I found it =) so I’m catching up on all the reading and even though it might not make as much difference, I’m going to comment anyway!

    of course, my perspectives are very far removed from the point of view of economists or the very dangerous breed of amateur economists 😉 but hopefully it makes a difference! unfortunately, I don’t have any data to back-up what I say, but I’ll leave that to you!

    when comparing bus and car, I think one factor you may have left out is the green factor. what is the cost to the environment (which is still a cost!) when driving a car as compared to a bus? can that be factored into the overall cost of driving versus bussing?

    today, people are often encouraged to take buses rather than cars, can the trend change? BUT, it is important to note that most of the ‘take the bus not the car’ campaigns are urban and refer to local transportation rather than long-distance transport.

    just thoughts… musings, if you will =)

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