The Economics of Alternative Transportation Modes: An Empirical Assessment of the Twin Cities

This report presents a model of travel behavior for the Twin Cities Metropolitan Area using the 1990 Travel Behavior Inventory. The model incorporates mode choice and the number of trips individuals take. Using the estimation results, we report estimates for mode share price elasticities and find that they are quite low. All mode share elasticities are less than 0.25 which means that a 4% price change could cause no more than a 1% change in mode share. Mode share elasticities for nonwork trips are higher than those for work trips indicating that there is greater flexibility in non-work trip mode choices than in work trip choices. Two pricing policy simulations are performed and the results verify that there is low mode choice responsiveness to price changes. The welfare costs associated with these policies are derived. It is found that a 10% gasoline tax would cost the average traveler $0.33 per day. A transit fare reduction by one-half would benefit the average traveler $0.12 per day. It should be noted though that the transit fare reduction affects only a small part of the population who, apparently, receive large cost savings. Although the transit fare reduction does not reduce vehicle use by much, it does increase the transit share by 24%, a substantial increase in ridership. The results presented here imply that large price changes are necessary to induce people to reduce their vehicle use either by switching modes or reducing the number of trips they take.