Pricing of Bus Services in an Overcrowded City - A Suggested Policy

The government-owned transport corporations that provide intra city bus service in India suffer from huge loss. Hence it is necessary to improve the earnings of the transport corporations by innovative pricing. This paper looks at the passengers' reservation price for assured seat and builds up a theoritical model, which shows that pricing, based on seat reservation leads to increase in revenue and social welfare. This result is verified by primary survey based empirical study. It is observed that commuters are willing to pay more if seat is guaranteed. This result is important for pricing policy formulation by transport undertakings