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Economic Analysis

The Greater London Authority is considering reducing the fares on buses and the tubes for Oyster card users in 2006. Passengers using Oyster cards will face a decrease in the tube fares whereas the bus fares will be frozen at previous prices. According to the Mayor the motive behind this policy is to encourage passengers to use more of Oyster cards, because it is “the best value fare for their journey”. Mr Ken Livingstone argues that the use of Oyster cards will be beneficial because it is expected to speed up the journey therefore saves time.

In addition improve the competence of the public transport system compare to other private means of transport. This policy will not only affect customers but also the GLA itself. The reduction in fares is expected to increase demand for this product. Depending on the proportion changes in demand this will affect revenue for the GLA from Oyster card users. This essay is structured as follows; firstly the benefits of Oyster card will be discussed, highlighting its advantages opposed to other means of private transport.

Secondly the implication of the proposed strategy for GLA and third part is going to be a comparison between Oyster fare and other private means of transport. Finally I will conclude by advising the GLA on this policy. Benefits and importance of Oyster cards: Oyster card was introduced in May 2003 and on the Underground in January 2004. Since it has gained huge importance and rapid popularity.

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In 2004 there were around  1. 85 million users and as an increasing number of passengers switch to Oyster currently more than 2. 5 million people are using it. It has the largest customer base for all travel cards in the UK and more than 3 million journeys are made by this card. Oyster card brings extraordinary advantages over paper tickets and other private means of transport. Oyster card offers convenient and flexible ways of paying for travel such as it can be topped up online or over the phone and can be renewed at the underground stations. Besides, because of the magnetic strip it has its own unique ID.

It has the advantage of ‘touch & go’ i. e. , the card can be read through the card reader therefore reducing queues, saving time and speeding up the journey. There is also no need of registration any longer. Alongside, no more cash fares renewal, passengers can pay as they go yet again saving time and speeding up journeys (Aaron Scullion 2005 and The Independent 2005). Further, Oyster brings a sense of security to passengers, in terms of theft and loss of money at the tube stations as it is a cashless ticket.

Making passengers travelling securely unlike other private means of transport such as taxis or mini cabs where travellers have to carry cash to travel. Oyster card is a high tech smart card stores a large amount of data about the traveller such as personal details, education and training details etc etc. On one hand it is seen as an advantage for the security of the passengers but on the hand critics may see this as a disadvantage because of closing monitoring of individual’s movements (KabelNet 2003, p. 1). Oyster has something or the other in store for all its users such as for adults, students and children.

Oyster cards targets a large number of customers by adopting various price schemes (price discrimination) for instance students and over 65s pay only 1/3 of the price for all journeys. On DLR Oyster offers 10% discount for groups of 10 too. Here with different groups of customers Oyster applies price discrimination policy, charging different pricing from students and over 65s (Transport for London 2005, p. 5, 6 and 13). The prices in the table below are for daily single on three different means of transport provided.

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