As agencies across the country look to microtransit to expand mobility in underserved areas while searching for ways to sustain the service amid shrinking federal support and rising operating costs, new research suggests that simply raising fares may do more harm than good. 

A study led by Dr. Jia Li, associate professor at Wake Forest University School of Business, found that across-the-board fare increases in microtransit systems can significantly reduce ridership among occasional users while generating only modest revenue gains. 

The research published in Transportation Research Part A: Policy and Practice, titled “Heterogeneous Fare Sensitivity in Microtransit: Evidence From a Natural Experiment,” examined Wilson, North Carolina’s, citywide on-demand microtransit service operated by Via, but locally marketed as RIDE, which replaced the city’s fixed-route bus network in 2020.  

The study used rider-level panel data to evaluate how different groups of microtransit users responded to fare changes over time. 

Wilson has become one of the most closely watched microtransit case studies in the country, with ridership surging after the transition to on-demand service. But as agencies look to microtransit to serve low-density and underserved areas, Li said many may be misunderstanding how riders respond to pricing changes. 

“What our study shows is that the typical ‘one-price-for-everyone’ approach is fundamentally misaligned with how people actually use microtransit,” Li said. 

Study Reveals Sharp Divide Between Rider Types 

Using detailed rider-level trip data tied to a natural experiment in Wilson, the study analyzed the impact of a fare increase from $1.50 to $2.50 implemented in 2022. Because no major service changes occurred at the same time, researchers were able to isolate the effects of pricing on rider behavior. 

The results revealed a sharp divide between rider types. Frequent riders, many likely commuting to work, showed relatively little change in usage after fares increased. Occasional riders, however, substantially reduced their use of the service. 

Researchers found that riders with established travel routines demonstrated substantially lower fare elasticity than infrequent users, suggesting commute-driven demand remained stable even after prices rose. However, this group is small relative to the overall user base. 

“The majority are occasional users, and they’re highly price sensitive,” Li said. “When you raise fares uniformly, you don’t get much more revenue from frequent riders, but you do lose a lot of occasional trips.” 

Even large fare increases produced limited financial upside. Simulation modeling in the study showed that revenue gains flattened quickly. According to the study’s simulation model, a hypothetical 40% fare increase would boost total revenue by only about 7%, largely because ridership losses offset much of the additional fare collection. 

“It means fare increases are not going to solve the funding problem, at least not on their own,” Li said. 

The findings arrive as many transit agencies reevaluate service models developed during or after the pandemic. Although smaller cities and suburban systems have turned to microtransit to improve geographic coverage and reduce long waits associated with fixed-route operations. 

The paper notes that microtransit systems operate differently from traditional fixed-route transit because rider demand is more behaviorally responsive to pricing, convenience, and service uncertainty. 

Wilson’s system, for example, allows riders to request trips through an app, website, or call center for curb-to-curb service throughout the city. A good chunk of these trips is estimated to be work commutes. Li believes those commuting patterns point toward one potential funding strategy: employer partnerships. 

“Many of the least price-sensitive riders are likely commuting to work, and employers have a clear interest in reliable transportation for their workforce,” he said. 

Li recommended that major employers, such as hospitals and manufacturing plants, consider the benefits of reliable employee transportation and subsidize passes. This would shift part of the subsidy burden from the city to private partners, he added.  

How Targeted Pricing and Employer Partnerships Help 

Rather than broad fare hikes, the study also recommends more targeted pricing strategies, including off-peak discounts, income-based fares, and loyalty incentives designed to encourage occasional riders to become more consistent users. 

“One illustrative example is a threshold-based incentive, for instance, ‘take three rides this week and get the fourth at a discount,’” Li explained. 

The research also raises caution flags for agencies considering replacing low-performing fixed routes with microtransit. 

“Microtransit looks like a flexible upgrade, but it asks more from riders, such as booking a trip, waiting, adjusting to variable pickup times,” Li said. “Fixed routes are simple and predictable. Not everyone makes that transition. Some riders don’t switch; they just disappear.” 

Perhaps the biggest takeaway for transit leaders, Li said, is that aggregate ridership figures may hide deeper instability within a system. 

“One way to think about it is that a stable system can still be a fragile system,” Li said. 

In Wilson, overall ridership appeared stable following the fare increase. But underneath the surface, existing riders were reducing their trips while new riders replaced them, masking underlying churn in the rider base. 

“The broader lesson is that microtransit is a behavioral system, not just an operational one,” Li said. “If you only look at averages such as total ridership, you will miss the underlying dynamics that actually drive performance. The real question is not just how many people are riding, but who is riding, how their behavior is changing, and how the rider base is evolving over time.”