MTA Fare Hike: Cause and Effect of No Choice Decisions

April 20, 2009

Help ButtonThere is a lot of debate around New York City about the recent vote to raise the cost of monthly metro cards from $81 to $103.  It seems insane to spend over $100 for unlimited access to New York City’s public transportation systems every month.  But if you truly understand the situation the MTA is in, then you know it’s not all their fault.

This debate brings up the thoughts of others like it.  What happens when an organization is forced into a decision because of a negative situation?  Even worse, where is the motivation to innovate when the consumer has almost no choice in their decision making process?

See, the MTA was forced into this decision because they need money, desperately.  The government has not provided the funding needed to improve NYC’s transportation, so the MTA continues to spend more than it takes in.  This can only go on for so long, and then they decide they’re not making enough, and then they raise prices.  It’s a constant cycle.

When an organization is running out of money, they panic
.  They will look for new ways to make money from their current customers.  This is the case with banks, airlines and municipalities charging new fees, seemingly pulled from thin air.  They need money, so they “trick” their customers into spending more.  This is easier than reaching new customers.  And though it may not be as smart, and it most likely will create negative brand awareness, it’s the nature of a panic.

What’s worse is that in most cases where these types of situations occur, the consumer does not have much of a choice.  For the MTA, New York City workers and residents will continue to use the subways and buses.  Why?  We don’t have much of a choice if we want to continue to get from place to place.  Its still less expensive than owning a car, more efficient than walking or biking, and generally very convenient.  So there is no motivation for the MTA not to raise their prices.  The economic rules that say when prices go up, the number of people who will pay for it go down, do not apply in this type of monopolistic situation.  There is almost no risk.

You can put the onus of the problem squarely on the shoulders of the organization in question, and say that it is not an ethical decision to raise prices on customers who need their service.  But in truth, an organization will do anything to survive.  It is in their nature to make enough money to continue to operate, and you can’t fault it for looking to make more money when it starts to run out.

The true problem exists on a bigger level.  In this case, it may fall on the state and local governments who cut funding for transportation.  In many cases, it may lie in the hands of the systems we have put in place.  Competition is important.  Creativity and innovation are vital.  Companies that perform better should always win.

Where there is no motivation to innovate, most organizations simply won’t.

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