Demand Responsive Transit Brokerages

Actors within the Demand Responsive Transit Exchange

Current State• In Singapore, this is

the current way people can find cabs.

• A static poster shows the numbers of cab firms.

• We propose a bid/ask system so beloved of financial markets

Road Pricing• If roads are "leased" to private firms who have to make profit (i.e.

prove their efficiency according to utility) in order to keep the franchise, while at the same time adhering to minimum standards of road maintenance, safety and transit throughput, stipulated by the contract terms, we would effectively have a better system of road management, no?

• The key is to provide enough competition and policing to keep firms from colluding to deliver less than stellar service.

• One could argue that the firms never own the roads per se, just as one never "owns" a hotel room (ahem, www.guestinvest.com) or that no large user ever "owns" spectrum.

Road Pricing• A DRT Exchange adds yet another performance layer onto the

road-spacetime usage system. Not only are the roads maintained according to the utility motive (measured by economic, environmental and social viability), but now there is an incentive for the road users themselves to find efficient ways to use that roadspacetime. The only way this can happen is if we apply some sort of pricing mechanism to road-spacetime.

• e.g. I want to buy 20 minutes worth of travel on the M62 at 08:00 every weekday from Monday Jan 5th 2009 - Dec 18th 2009. On a DRT Exchange, this would be priced up. A DRT Broker would have to buy that time from the RoadSpaceTime operator and then resell it. Due to competition, there would be price discovery.

• There would obviously be a "turn up and pay system“ in addition to the contract system – much like for hotels.

Road Pricing• (Bandwidth companies do this already - you buy e.g. 15Gb a

month of downloads and then you pay per Mb over if you exceed the limit)

• Of course, if I end up on the motorway for 22 minutes, I would have to pay the per minute cost for the 2 extra minutes. This can be done easily enough with existing technology (on ramp /off ramp cameras to get check-in, check-out).

• By definition, it now makes sense to share vehicles. We would find courier companies choosing to use empty capacity in passenger vehicles (in the boot etc) to carry parcels.

• We need to be able to give roadspacetime users a full spectrum of service choices across a full range of prices.

The DRT Broker• A DRT Broker would be an important participant

in a DRT Market.• The Broker buys wholesale transit contracts from

Market Makers on the exchange and sells them to roadspacetime users.

• In the first generation Texxi model, this will simply be to have “packaged trips” a type of ride sharing where we find people with compatible itineraries and allow them to share a vehicle.

The User• The User is anyone needing to go from point A to

point B who is prepared to share a journey• If there are not enough co-riders (a likely

occurrence at the outset of implementation of an exchange), the Market Maker will have to buy the empty seats

• For users who use the service frequently, longer term contracts will reduce the price per trip significantly

Adaptation of User behaviour

• A most important point is to get users used to a reliable service for 6-12 months.

• Moving away from the private car is not going to happen unless the users feel that the service is reliable.

• Thus “Liquidity” is provided by the exchange taking up the slack (buying empty seats in a ride) to encourage the drivers to keep

“Shows”• In trading operations, there are what is

known as “shows”.• Many Market Makers will provide prices

on financial instruments at any given time, representing this as a bid/ask.

• When one buys holiday currency, one is familiar with this: there is a buy price (ask) and a sell price (bid) compared to the local currency for the currency you wish to buy

Dynamic Pricing• Many hotel chains have now moved

toward Dynamic Pricing.• This model has done away with the fixed

(or rarely changed) notion of room rates and instead adapts to demand.

• If we can accept floating prices for houses, why not for transit?

• It has been shown that this works for hotel rooms, now why not taxis?

Overcharging

• If there exists sufficient competition, if the authorities make sure price fixing is punished and if people have the right to choose to purchase or not to purchase, there can be no overcharging