Subsidizing and pricing private toll roads with noncontractible service quality: A relational contract approach

In private toll roads, some elements of the private operator’s performance are noncontractible. As a result, the government cannot motivate the private operator to improve them through a formal contract but through a self-enforcing contract that both parties are unwilling to deviate unilaterally. In this paper, we use noncontractible service quality to capture these performance elements. By employing a relational contract approach, we aim to investigate the optimal subsidy plan to provide incentives for quality improvement. We show that government subsidy is feasible in quality improvement when the discount factor is sufficiently high and marginal cost of public funds is sufficiently small. Under feasible government subsidy, we have demonstrated the optimal subsidy plans in different scenarios. Moreover, some comparative statics are presented. Based on the derived subsidy plans, we further investigate the optimal toll price. We find that the optimal toll price generates zero surplus for the private operator and positive surplus for consumers. We then make two extensions of our model to re-investigate the government’s optimal decisions on subsidy plan and toll price when her decision sequence is changed and when government compensation is present upon termination of the relationship. Some implications for practice have been derived from our model results.     

Assessing Service Quality,Switching Costs and Customer Loyalty in Home‐Delivery Services in Taiwan

Abstract

This study empirically investigated service quality, switching costs and customer loyalty from home‐delivery services' customers' perceptive. With regard to service quality attributes, findings indicated that customers were most satisfied with ‘range of delivery’, followed by ‘seldom loses parcels’, ‘invoice accuracy’, ‘prompt and reliable collection’ and ‘delivery by due time’. They were least satisfied with competitiveness of price. A structural equation modelling (SEM) approach was employed to analyse the impact of service quality and switching costs on customer loyalty from customers' perspective. Results revealed that service quality positively influenced switching costs and customer loyalty, and switching costs had a positive effect on customer loyalty. Investigation of the moderating effect of switching costs on the relationship between service quality and customer loyalty indicated that it was significantly important. Theoretical and practical implications of the findings for firms providing home‐delivery services are discussed.     

Man and his transport behaviour Part 4. Fare strategies for public transport—a problem outline

Abstract

In April 1983, the “Fourth World Conference on Transport Research” was held in Hamburg. For a period of four days, experts from all parts of the world discussed transport research and planning problems. The discussions were divided into eight so‐called ‘sub‐topics’. Fortunately, one of the sub‐topics, ‘Man and his Transport Behaviour’ (chaired by Moshe Ben‐Akiva, U.S.A. and Werner Brög, Federal Republic of Germany) dealt with the individual and his behaviour. This complemented the traditionally supply‐oriented thinking of the transport planners by introducing the demand component which had frequently been neglected in the past. Since the view has become increasingly widespread that transport is meant to serve people, and thus, that research should emphasize the (potential) users of the transport system, the number of papers submitted and presented on this sub‐topic was especially large.

However, the number of papers which could be included in the ‘Conference Proceedings’ was limited and this would have meant that a number of interesting documents could not be published. Therefore, papers on four special areas within this sub‐topic are to be published in four consecutive issues of Transport Reviews. The areas which will be dealt with are ‘Telecommunications’, ‘Non‐Motorised Transport’, ‘Special Problems in Third World Countries’ and ‘Fare Structures in Public Transport’. The papers were selected strictly according to their contents. A brief commentary in each issue explains in turn the reasons for choosing each of the four subject areas.

Parts 1–3 appeared in Transport Reviews, 4, 99–113, 173–212, 273–298.     

Book review

Abstract

In April 1983, the “Fourth World Conference on Transport Research” was held in Hamburg. For a period of four days, experts from all parts of the world discussed transport research and planning problems. The discussions were divided into eight so‐called ‘sub‐topics’. Fortunately, one of the sub‐topics, ‘Man and his Transport Behaviour’ (chaired by Moshe Ben‐Akiva, U.S.A. and Werner Brog, Federal Republic of Germany) dealt with the individual and his behaviour. This complemented the traditionally supply‐oriented thinking of the transport planners by introducing the demand component which had frequently been neglected in the past. Since the view has become increasingly widespread that transport is meant to serve people and thus that research should emphasize the (potential) users of the transport system, the number of papers submitted and presented on this sub‐topic was especially large.

However, the number of papers which could be included in the ‘Conference Proceedings’ was limited and this would have meant that a number of interesting documents could not be published. Therefore, papers on four special areas within this sub‐topic are to be published in four consecutive issues of Transport Reviews. The areas which will be dealt with are ‘Telecommunications’, ‘Non‐Motorised Transport’, ‘Special Problems in Third World Countries’ and ‘Fare Structures in Public Transport’. The papers were selected strictly according to their contents. A brief commentary in each issue explains in turn the reasons for choosing each of the four subject areas.     

Incentive subsidy scheme design with elastic transport demand

Huge public transport subsidies caused by deficits have become a heavy financial burden on some local governments due to the decline of bus passenger numbers. It is essential to apply the performance‐based contract to bus services considering maximization of social welfare. This paper constructs an incentive subsidy contract considering the decision‐making powers of the service level and calculating the proper frequency elasticity aiming at two problems of performance‐based contracts. Meanwhile, we consider a role of bus operators ignored by most researchers. Under the scheme, the decision‐making power of the service level is discussed based on five assumptions, and meanwhile, bus operators are motivated to reduce cost and improve service level in the scheme. The case of the bus service of Arao city indicates that the optimal frequency equals to zero when bus operators decide frequency. If bus operators determine efforts, the optimal effort also equals to zero with the goal of maximizing the profit. Also, bus operators can play their roles in lessening cost and improving service level to help bus operators and the local government achieve a win‐win situation, which maximizes the social benefit in this subsidy scheme when all factors are decided by the government. Copyright © 2013 John Wiley & Sons, Ltd.     

Optimal competitive freight network design as hierarchical variational inequalities programming problems

Freight networks are a case of systems that multiple participants are composing interrelations along the complete supply chain. Their interrelations correspond to alternative behavior, namely, cooperation, non-cooperation and competition, while they are large-scale spatially distributed systems combining multiple means of transportation and the infrastructure and equipment typically utilized for servicing demand, results to a complex system integration. In this paper, the case of the optimal design of freight networks is investigated, aiming to highlight the particularities emerging in this case of transportation facilities strategic and/or operational planning and the multiple game-theoretic and equilibrium problems that are structured in cascade and in hierarchies. The application that is investigated here focuses in the design of a significant ‘player’ of the freight supply chain, namely container terminals, while the proposed framework will aim on analyzing investment strategies built on integrated demand–supply models and the optimal network design format. The approach will build on the multilevel Mathematical Programming with Equilibrium Constraints (MPECs) formulation, but is further extended to cope with the properties introduced by the ‘designers’ (infrastructure authorities), shippers and carriers competition in all levels of MPECs. Since container terminals are typically competing each other, the nomenclature used here for formulating appropriate MPECs problems are based on hierarchies of Variational Inequalities (VI) problems, able to capture the alternative relationships emerging in realistic freight supply chains. The proposed formulations of the competitive network design case is addressed by a novel approach of co-evolutionary agents, which can be regarded as new in equilibrium estimation. Finally, the results are compared with alternative network design cases, namely the centralized cooperative and exchanging design. Under this analysis it is able to highlight the differences among alternative design cases, but moreover an estimation of the ‘price of anarchy’ in transportation systems design is offered, an element of both theoretical as well as practical relevance.     

Methodology to determine service delivery levels for public transportation

When designing transit services, the Level-of-Service concept has been widely used by transport planners and service providers to assess the service quality of an existing transit system. In addition to the service quality assessment, service providers also need to estimate the service levels that will satisfy a maximum number of users and potential users, across all socio-economic groups, so as to maximize patronage. This paper demonstrates a method using the concept of ‘user satisfaction levels’ and their ‘zone of tolerance’, along with total utility and marginal utility for service providers, to provide a range of service delivery levels for individual transit service attributes in the city of Kolkata. This range of service levels provides a guideline for service providers within which they can consider making an improvement in service level. However, the final decision on service improvement is an outcome of both financial and infrastructural feasibility.     

Dynamic process model of mass effects on travel demand

Whereas transportation planners commonly predict the negative impacts of mass transportation, there is increasing empirical evidence of the existence of positive mass effects, whereby increased use of a mode by the ‘mass’ will generally increase its attractiveness for future travellers. In this paper we consider the dynamic impact of such an effect on the problem of travel demand forecasting, with particular regards to social network effects. Our proposed modelling approach is inspired by literature from social physics, evolutionary game theory and marketing. For simplicity of exposition, our model is specified for a scenario in which (a) there is a binary choice between two mobility lifestyles, referred to as car-oriented and transit-oriented, and (b) there are two population groups, where one is the “leading” or “innovative” population group and the other the “following” or “imitating” population group. This latter distinction follows the rather well-known Bass model from the marketing literature (1969). We develop the transition probabilities and transition dynamics. We illustrate with a numerical case study that despite lower intrinsic utility for the transit lifestyle, significant changes towards this lifestyle can be achieved by considering congestion, service improvements and mass effects. We further illustrate that mass effects can be positive or negative. In all cases we explore the sensitivity of our conclusions to the assumed parameter values.     

High‐speed rail cost recovery time based on an integer optimization model

With increasing gasoline prices, electric high‐speed rail (HSR) systems represent one means to mitigate overexposure to volatile prices. However, additional research is needed related to funding this infrastructure. In this paper, we develop a new integer optimization model to address this problem and use a hypothetical case study to demonstrate the approach. The objective of the approach is to minimize the time period in which the cost of HSR construction and operation can be recovered. This is an iterative process based on an integer optimization model, whose objective function is to determine the optimum recovery time (ORT), by setting the HSR ticket price and frequency. Embedded in the optimization model is a multinomial logit model for calculating the demand for HSR as a function of these decision variables, thus capturing the effects of level of service on market share. In particular, the optimization model accounts for the role of different types of subsidies toward HSR construction (one‐time subsidies at construction, annual subsidies, and subsidies depending on frequency). This method can also help determine whether an HSR system should be built or how much subsidy should be provided given a fixed expected cost recovery time. By integrating the logit model into the objective function evaluation, the effects of ticket price and service frequency on service demand can be directly captured. Copyright © 2014 John Wiley & Sons, Ltd.     

Passengers’ Perceived Service Quality of City Buses in Taipei: Scale Development and Measurement

Abstract

To understand fully passengers’ perceptions and expectations of the bus service quality in Taipei, business managers and governmental agencies must seek a proper scale that can reflect passengers’ opinions accurately. This study develops and tests a service quality scale designed for a city bus transit system in Taipei. Churchill’s paradigm and a focus group interview were combined into a multistage scale development procedure. Based on the procedure, Taipei city buses were selected as the example, for which a service quality scale was developed. The final scale contains four dimensions and 20 items. These four dimensions are ‘interaction with passengers’, ‘tangible service equipment’, ‘convenience of service’ and ‘operating management support’. Finally, the results of scale development and the managerial applications of the service quality scale for the city transit system are discussed.     

Impact assessment of the Internet of Things on feeder transit performance

ABSTRACT

Efficient planning for demand responsive transit (DRT) can contribute to fulfilling the first/last mile transport needs for users of a major transit line. With the advancement in communication technologies, the internet is expected to assist this growing need of providing first/last mile connectivity. This is proposed to be achieved through a network created by Internet of Things (IoT). This paper evaluates the effect of implementation of IoT on service quality (or disutility) of DRT for two scenarios – with enabled-IoT (e-IoT) and with disabled-IoT (d-IoT). Data from five different DRT-like systems known as Call-n-Ride (CnR) routes operating in Denver, Colorado, are used for evaluation purposes. These CnR routes are Meridian, Interlocken, South Inverness, Broomfield and Louisville. Results show that, in general, all CnR routes would experience more than a 58 percent decrease in disutility if their operations were based on ‘with e-IoT’ operations. Interlocken would record the largest percentage decrease (74 percent) in disutility if its route service switched from the ‘with d-IoT’ to the ‘with e-IoT’ scenario.     

Welfare maximization for bus transit systems with timed transfers and financial constraints

Conventional and flexible bus services may be combined to better serve regions with a wide range of characteristics. If demand densities and resulting service frequencies are low, the coordination of bus arrivals at transfer stations may significantly reduce passenger transfer times. A method is proposed for integrating, coordinating, and optimizing bus services while considering many‐to‐many travel patterns, demand elasticity, financial constraints, and appropriate service type for various regions. The objective is to maximize welfare, that is, the sum of producer and consumer surplus. The problem is solved with a hybrid optimization method, in which a genetic algorithm with bounded integer variables is selected for solving one of the subproblems. The service types, fares, headways, and service zone sizes are jointly optimized. Sensitivity analyses explore how the choice among conventional and flexible busses depends on the demand, subsidy, and demand elasticity parameters. The results also show that welfare can increase due to coordination, and these increases are found to be higher in cases with high demand or low subsidy. Copyright © 2015 John Wiley & Sons, Ltd.     

Optimal transit subsidy policy

The basic justification for transit subsidy is that such a subsidy is necessary, given substantial economies of scale, in order to permit fares to be set at a level which will result in reasonably efficient use of the service. Efficiency is not, however, merely a matter of the level of the fares but even more of the fare structure and pattern. Major changes in fare patterns are needed to permit reasonable efficiency of utilization to be attained, and full advantage derived from subsidy. Differentiation according to time and direction, as well as the distance of travel, is required. Ideally, competing modes such as the private automobile should be priced at marginal cost, differentially by time and place, and the subsidy should be derived from taxes on land values in the areas where such values are enhanced by the presence of transit service at low fares. In the absence of such conditions, fares should differ from marginal cost in ways that take into account the impacts of transit fare variations on auto traffic and congestion, and on the subsidy requirements and the adverse impacts of the taxes imposed to finance the subsidy.In addition to these economic efficiency considerations there may be added considerations of distributional impact and political acceptability, which may modify the optimal solution somewhat but should not greatly change the main outlines of the patterns to be recommended.     

Organization and planning of ambulance transport services in England and Wales

The ambulance service is the largest special needs transport operator in England and Wales and an important pillar of support to the National Health Service. In the last decade its size and role as a transport agency have been the subject of at least two government‐inspired reviews which have questioned the efficiency of the ambulance service and examined in some detail its operational performance. The ambulance service also faces constraints on its funding, like the rest of the health service, which raises questions as to its ability in the future to meet all patient demands for transport, especially in the area of non‐emergency outpatient services. The organization of the ambulance service is described from a number of perspectives: historical, institutional and managerial. These suggest that changes occurring in the approach to health care and management which are based on assumptions of cost‐effectiveness and competition, will likewise affect the organization and provision of patient transport services. The ambulance service may become an even more specialist operator competing or co‐operating in certain areas of work with other transport agencies especially in the area of non‐emergency outpatient services. Scenarios are outlined on how this may be achieved and the likely implications for the delivery of health care.     

Route Choice Behaviour of Freeway Travellers Under Real-time Traffic Information Provision – Application of the Best Route and the Habitual Route Choice Mechanisms

Abstract

This paper investigates route choice behaviour on freeways between Taipei and Taichung in Taiwan under the provision of real-time traffic information. Two types of route choice selection rules (the best-route and habitual-route) are analysed using ordered probit models to identify the major influences on freeway travellers’ route choice behaviour. The level of service associated with each route is defined as a generalised cost saving (GCS) and specified non-linearly with a threshold inherent to travellers. The marginal (dis)utility thresholds in the ‘best’ and ‘habitual’ behaviour models are identified through a goodness-of-fit grid. The results confirm that the thresholds for changing the inertia behaviour of drivers should be larger than the ones for choosing the best routes. In addition, the drivers are more likely to choose either the best or the habitual routes once the GCS are greater than the identified threshold values.     

Experience in judging controversial road projects

Abstract

Road construction of all kinds, especially of urban motorways, has in recent years acquired a very bad reputation in industrialized countries. Traffic engineers are, because of their attitude, not entirely without blame for this development. With their attention glued nearly hypnotically to dimensions and technical design, considerations about the meaning and function of the construction are very often neglected, all the more since the engineers might otherwise risk their own jobs. It is, however, becoming increasingly clear that the cause of the scepticism and uneasiness prevailing in the public is the lack of a comprehensive judgement. Using a concrete example, this paper describes how decision‐making can degenerate when such judgement is omitted. Using a second example, it is then demonstrated how such a comprehensive judgement can be integrated in decision‐making from the very beginning. Such an integration sets very high methodological and procedural standards and constructive aids are offered for this purpose. It is shown that, while the substantial findings of a comprehensive judgement should be logically consistent, plausible and up to the latest standard of knowledge, the nature and intelligibility of the presentation and the preparedness for a publicly presented explanation in the form of ‘after‐care’ are of much greater importance for decision‐making in the political sphere. This ‘after‐care’ should accordingly become an indispensable component of the decision‐making process.

All those involved should become aware of the fact that a ‘positive’ result of decision‐making in the field of road construction is not a priori defined as the construction of road and a ‘negative’ one as its prevention. The actual positive result is rather the creation of a consciousness of the problem on hand, which can serve as a basis on which a decision is taken in full realization of all its consequences.     

The effect of attitudes on reference-dependent preferences: Estimation and validation for the case of alternative-fuel vehicles

Several recent studies in transportation have analysed how choices made by individuals are influenced by attitudes. Other studies have contributed to our understanding of apparently non-rational behaviour by examining how choices may reflect reference-dependent preferences. This paper examines how reference-dependent preferences and attitudes together may explain individual choices. In a modelling framework based on a hybrid choice model allowing for both concepts, we investigate how attitudes and reference-dependent preferences interact and how they affect willingness-to-pay measures and demand elasticities. Using a data set with stated choices among alternative-fuel vehicles, we see that allowing for reference-dependent preferences improves our ability to explain the stated choices in the data and that the attitude (appreciation of car features) explains part of the preference heterogeneity across individuals. The results indicate that individuals have reference-dependent preferences that could be explained by loss aversion and that these are indeed related to an individual’s attitude towards car features. The models are validated using a large hold-out sample. This shows that the inclusion of attitudes improves the models’ ability to explain behaviour in the hold-out sample. While neither reference-dependent preferences nor the attitude affect the average willingness-to-pay measures in our sample, their effect on choice behaviour has implications for policy recommendations as segments with varying attitudes and reference values will act differently when affected by policy instruments related to the demand for alternative-fuel vehicles, e.g. subsidies.     

Revenue sharing with multiple airlines and airports

This paper investigates the effects of concession revenue sharing between an airport and its airlines. It is found that the degree of revenue sharing will be affected by how airlines’ services are related to each other (complements, independent, or substitutes). In particular, when carriers provide strongly substitutable services to each other, the airport has incentive to charge airlines, rather than to pay airlines, a share of concession revenue. In these situations, while revenue sharing improves profit, it reduces social welfare. It is further found that airport competition results in a higher degree of revenue sharing than would be had in the case of single airports. The airport–airline chains may nevertheless derive lower profits through the revenue-sharing rivalry, and the situation is similar to a Prisoners’ Dilemma. As the chains move further away from their joint profit maximum, welfare rises beyond the level achievable by single airports. The (equilibrium) revenue-sharing proportion at an airport is also shown to decrease in the number of its carriers, and to increase in the number of carriers at competing airports. Finally, the effects of a ‘pure’ sharing contract are compared to those of the two-part sharing contract. It is found that whether an airport is subject to competition is critical to the welfare consequences of alternative revenue sharing arrangements.     

A framework to evaluate policy options for supporting electric vehicles in urban freight transport

Electric vehicles (EVs) are considered as a feasible alternative to traditional vehicles. Few studies have addressed the impacts of policies supporting EVs in urban freight transport. To cast light on this topic, we established a framework combining an optimization model with economic analysis to determine the optimal behavior of an individual delivery service provider company and social impacts (e.g., externalities and welfare) in response to policies designed to support EVs, such as purchase subsidy, limited access (zone fee) to congestion/low-emission zones with exemptions for EVs, and vehicle taxes with exemptions for EVs. Numerical experiments showed that the zone fee can increase the company’s total logistics costs but improve the social welfare. It greatly reduced the external cost inside the congestion/low-emission zone with a high population, dense pollution, and heavy traffic. The vehicle taxes and subsidy were found to have the same influence on the company and society, although they have different effects with low tax/subsidy rates because their different effects on vehicle routing plans. Finally, we performed a sensitivity analysis. Local factors at the company and city levels (e.g., types of vehicle and transport network) are also important to designing efficient policies for urban logistics that support EVs.