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.     

Effects of subsidies on urban public transport

Because of a general trend of increasing costs of public transport operations and higher subsidies (in some cases accompanied by falling patronage) the European Conference of Ministers of Transport (ECMT) initiated a study of subsidisation and sought the help of the Transport and Road Research Laboratory. The study, in which eighteen countries took part, was concerned with the aims of subsidy, the sources and conditions attached to subsidy, trends in subsidies and the effect of subsidies on patronage, fares, service levels, costs and productivity.The qualitative information concerning the aims of subsidy was analysed in relation to the likelihood of achieving such aims, taking into account current experience of attempts to switch car drivers to public transport. The quantitative information on trends referred to public transport stage services covering where possible the entire country and relating to the period 1965–77; these data were supplemented by data from 59 cities in different parts of the world collected in the course of a TRRL-sponsored study of travel demand factors. The relationship between patronage and service levels, and between subsidies and various operating factors, including costs and productivity, were studied using regression analysis and the general conclusion reached was that although the major part of the subsidy paid was reflected by reduced fares and improved service levels there may well have been some leakage into higher unit costs and manning levels.     

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.     

Estimating the inefficiency in the Norwegian bus industry from stochastic cost frontier models

A stochastic cost frontier function based on data from 170 of the 175 Norwegian subsidized bus companies is estimated under two alternative presumptions regarding the distribution of the inefficency among the bus operators. When the inefficiency is assumed to be half-normally distributed, the average inefficiency in the industry is estimated to be 13.7 per cent. This calculated value is nearly halved (7.2 per cent) when the exponential distribution is applied, while the ranking of the companies according to inefficiency is unchanged. By regressing the estimated inefficiency values for each company on some exogenous variables describing its ownership structure and the subsidy policy which it faces, it is seen that inefficiency of the companies which negotiate with the public authorities over the subsidy amounts is slightly higher than the inefficiency of the companies which face a subsidy policy based on cost norms. Our analysis gives, however, no significant differences in the efficiency between privately owned bus companies and publicly owned bus operators, and shows only minor economies of scale.     

Passenger experience with quality-enhanced bus service: the tyne and wear ‘superoute’ services

This paper investigates the role that enhanced service quality introduced into a deregulated market has in improving the experience of bus travel by a sample of passengers in the Tyne and Wear area of England. A generalised ordered choice (GOC) model that accounts for preference heterogeneity through random parameters, as well as heteroscedasticity in unobserved variance, and random parameterisation of thresholds, is implemented to identify sources of influence on the overall experience of bus travel in the presence and absence of the quality-enhanced treatment of service. The GOC model is contrasted with a standard ordered logit model, and the marginal effects associated with the preferred GOC model are derived for each influencing attribute, taking into account the various ways in which each influence contributes to the utility associated with each level of bus experience. The paper supports a view that the introduction of quality improvements, via a Quality Bus Partnership, does contribute non-marginally to an increase in a positive bus experience, and signals a way forward through cooperative intervention, to grow patronage. Knowing which attributes successfully deliver a more positive experience (and those that do not) means that resources are effectively targeted at the aspect of service provision which will increase patronage and therefore revenues, satisfying the objectives of both the bus operator and the local authority partner.     

Estimating the demand for urban bus travel

The disadvantages of conventional transportation study models, in particular their large data requirements and their weaknesses in dealing with changes in trip generation rates have led to a need for a simple model that can quickly and at low cost examine alternative public transport strategies.This paper investigates simple economic models of bus demand, examines alternative variables that can be used and discusses some alternative model forms. It demonstrates the results of a model using data from twelve urban bus operators in Britain and compares the results with those from other types of study. The model utilises fare and service quality elasticities to explain the decline in passengers on urban bus services, and derives an average elasticity with respect to fare changes of –0.31 and with respect to service quality changes of +0.62. It is estimated that fare rises accounted for 13% of the 43% decline in passengers over the last fifteen years, vehicle mileage reductions for 14.3% and that only 15.7% was due to such factors as rising car ownership which are often given as the cause of declining bus patronage.The results, by showing that passengers are far more sensitive to changes in service than they are to fare rises, are a useful guide to the broader public transport policy issues, and the paper concludes that the model does provide a useful method of forecasting public transport demand at a strategic level. Further work is needed, however, to establish more accurate forecasts for different types of passenger and studies are now being undertaken to establish these and to construct an operational forecasting model that can be applied with only limited data requirements     

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.     

Analyzing the gap between the QOS demanded by PT users and QOS supplied by service operators

This research evaluated the effectiveness of tendered bus public transportation (PT) in improving the attractiveness of that service in order to promote sustainable mobility. This was accomplished by characterizing the gap between the quality of service (QOS) supplied by contract regimes and that which is demanded by passengers. Analysis of a customer satisfaction survey aimed at bus users provided insight into their ranking of 14 QOS parameters while 13 active service contracts were analyzed for their impact on QOS. In-depth interviews with relevant experts completed the complex narrative that is Israel’s policy of privatization in PT. Both qualitative and quantitative analyses helped identify those QOS parameters most in demand by passengers and impacted by contracts. The results show that the gap is minimal, high demand parameters receive increased priority in contracts. In addition this research documented an evolution in the method contracts employed to provide QOS. Late model contracts define an increasingly higher minimum QOS; but also strongly limit the operator’s ability to make service changes. This is a trend which should improve QOS in Israel but reduce the incentive for operator enacted QOS initiatives. Despite its obvious success to date, it might be time to change again the contract regime for the provision of competitive bus services in Israel.     

Short-term post-earthquake bus transit planning in Managua

In December 1972 an earthquake hit Managua, Nicaragua, killing 5,000 inhabitants, while wounding 20,000 persons and destroying its core area of 13 square kilometers. The earthquake also seriously disrupted the bus transit system. Bus transit patronage fell as a result of the loss of population of 144,000 persons who moved temporarily out of the city, while costs rose appreciably as both round trip bus distances and the proportion of the trips on unpaved roads doubled with respect to pre-earthquake levels. By September 1973, ten of the thirteen bus companies were on the verge of bankruptcy and were demanding from the regulatory body stiff increases in fares.This paper presents analyses and recommendations for improving the short-term efficiency of bus routes in Managua by applying planning techniques suited to the data availability problems of developing countries.In view of the lack of cost data for the bus routes, a cost analysis was conducted; Jan de Weille's cost factors were adapted to Nicaragua to portray the near bankrupt condition of most routes. These cost factors were verified by means of selected interviews with the private transit entrepreneurs.Next, a simple patronage prediction model was developed which related patronage for a route to the population and employment served by the route. This simple patronage model was then applied to redesign the bus routes of Managua. A policy of bus route redesign coupled with the paving of city streets along the bus routes is shown to have sufficed in avoiding fare increases. Finally, the paper reviews the bus transit regulatory setting and develops some recommendations for its improvement.Adjunct Associate Professor of the Catholic University of America. This study was conducted while the author was stationed in Nicaragua as a consultant to Harvard Development Advisory Service.     

The planning of urban bus routes and frequencies: A survey

Urban bus services still play an important role in the movement of people in Britain, although since the 1950's bus patronage has been declining and costs of operation have been increasing. Most of the urban bus networks in Britain (and to a very large extent the Western World) have developed or evolved over the years and it is sometimes said that, despite the changing conditions of bus transport, few of these bus networks in Britain have undergone major re-organisation. A survey was carried out to ascertain this view and to establish the approaches used by British urban bus operators.Five approaches to the planning of urban bus routes and frequencies have been identified: (1) manual; (2) Market Analysis Project; (3) systems analysis; (4) systems analysis with interactive graphics; and (5) mathematical. Previous research in, and application of, the different approaches are described and examined.Between 1970 and 1980, 82.4% of those British urban operators who responded to the survey carried out some kind of major bus study. The survey results run counter to the view that there has been little recent change in urban bus networks in Britain, but the alleged conservatism of the bus industry appears when the approaches used for re-planning bus services are examined - 71.4% of the operators used a manual approach and only a meagre 28.6% made use of simple assignment techniques to predict the potential passenger impacts of the alternative networks appraised.     

On the financial viability of mass transit development: the case of Hong Kong

Mass transit projects are often a top contender of many cities to meet their increasing demand for travel. Despite the global trend of privatization, mass transit services, as public goods, remain largely being provided and operated by the public sector. Hong Kong is one of the few exceptions that all mass transit services are commercially operated. Both rail and bus services in Hong Kong are reputable for their quality and profitability, often serving as benchmarks for new projects. In this study, we investigate the factors contributing to this success. In particular, we ascertain the quality of transit service provision by the private sector over the past two decades. Then, we conduct an in-depth analysis of the account books of leading railway and bus operators in Hong Kong so as to shed light on their financial viability. Through this study, we hope to present crucial factors for providing financially viable private transit services.     

An analytic investigation of optimal bus size

The use of smaller buses offers passengers a better service frequency for a given service capacity, but costs more to operate per seat provided. Within this trade-off there is an optimal bus size which maximises social benefit. A mathematical model is described which can be solved analytically to provide an explicit relationship between optimal bus size and factors such as operating cost, level of demand, and demand elasticities. The model includes: passenger demand varying with the generalised cost of travel according to a constant elasticity; the effect of changes in bus occupancy on average waiting times and on operating speed; the financial constraint that farebox revenue must equal operating cost less subsidy; an allowance for external benefits associated with generated demand, and for the effect of the flow of buses on traffic congestion; and an operating cost increasing linearly with bus size. The optimal size varies with the square root of demand, and with the unit cost to the power of 0.1 to 0.2. It also increases slowly with the proportion of cost covered by subsidy. For typical urban operating conditions in the United Kingdom the optimal size for a monopoly service lies between 55 and 65 seats assuming the observed relationship between cost and size; it is possible that changes in working practices could make smaller buses relatively cheaper to operate, so reducing the optimal size, but it seems unlikely to fall below 40 seats.     

Evaluation of an existing bus network using a transit network optimisation model: a case study of the Hiroshima City Bus network

This study evaluates an existing bus network from the perspectives of passengers, operators, and overall system efficiency using the output of a previously developed transportation network optimisation model. This model is formulated as a bi-level optimisation problem with a transit assignment model as the lower problem. The upper problem is also formulated as bi-level optimisation problem to minimise costs for both passengers and operators, making it possible to evaluate the effects of reducing operator cost against passenger cost. A case study based on demand data for Hiroshima City confirms that the current bus network is close to the Pareto front, if the total costs to both passengers and operators are adopted as objective functions. However, the sensitivity analysis with regard to the OD pattern fluctuation indicates that passenger and operator costs in the current network are not always close to the Pareto front. Finally, the results suggests that, regardless of OD pattern fluctuation, reducing operator costs will increase passenger cost and increase inequity in service levels among passengers.     

Examining the Political and Practical Reality of Bus-based Real Time Passenger Information

Abstract

Enhancing the bus experience through improved information provision is a key element of UK Government transport policy. Real time passenger information (RTPI) is perceived to reassure waiting passengers, to benefit the bus operator through increased revenue and the local authority, by promoting social inclusion and achieving a modal shift. RTPI also provides an important tool for operators by allowing them to monitor services and refine their schedules.

The aim of this paper is to understand the reasons for implementing RTPI in the bus sector, and to determine the key issues impacting on the likely success of such a policy. A case study approach investigates the experiences of two provincial towns in the UK. The paper suggests that, whilst it is unclear whether RTPI has resulted in an increase in bus patronage, it is considered to be most effective when combined as part of a package of measures. It is intended that the findings from the two case studies will reveal lessons of relevance to authorities contemplating the introduction of RTPI.     

Using non-real-time Automatic Vehicle Location data to improve bus services

Although real-time Automatic Vehicle Location (AVL) data is being utilised successfully in the UK, little notice has been given to the benefits of historical (non-real-time) AVL data. This paper illustrates how historical AVL data can be used to identify segments of a bus route which would benefit most from bus priority measures and to improve scheduling by highlighting locations at which the greatest deviation from schedule occurs. A new methodology which uses historical AVL data and on-bus passenger counts to calculate the passenger arrival rate at stops along a bus route has been used to estimate annual patronage and the speed of buses as they move between stops. Estimating the patronage at stops using AVL data is more cost-effective than conventional methods (such as surveys at stops which require much more manpower) but retains the benefits of accuracy and stop-specific estimates of annual patronage. The passenger arrival rate can then be used to calculate how long buses spend at stops. If the time buses spend at stops is removed from the total time it takes the bus to traverse a link, the remaining amount of time can be assumed to be the time the bus spends moving and hence the moving speed of the bus can be obtained. It was found that estimation of patronage and the speed of buses as they move between stops using AVL data produced results which were comparable with those obtained by other methods. However the main point to note is that this new method of estimating patronage has the potential to provide a larger and superior data set than is otherwise available, at very low cost.     

On incentives and optimal effort to improve bus transit performance

ABSTRACT

This paper studies incentive-based subsidy to transit systems to improve performance. It derives a formula for optimal effort that equalizes marginal cost and marginal benefit and derives some principles from it among which is that the larger the value of a transit system’s performance criterion the larger the effort it will exert to improve it. Next, using a constrained cost minimization approach it derives a nonlinear cost function that includes optimal effort and estimates it using an unbalanced panel data of single mode U.S. bus transit systems. The results show that optimal effort is the equivalent of seven full-time employees (15,243 labor hours) per year and in real terms it results in 0.6% cost saving (US$198,331) and US$836,796 in incentive subsidy per observation. The implications of these findings are examined.     

The allocation of buses in heavily utilized networks with overlapping routes

Many transit systems outside North America are characterized by networks with extensively overlapping routes and buses frequently operating at, or close to, capacity. This paper addresses the problem of allocating a fleet of buses between routes in this type of system; a problem that must be solved recurrently by transit planners. A formulation of the problem is developed which recognizes passenger route choice behavior, and seeks to minimize a function of passenger wait time and bus crowding subject to constraints on the number of buses available and the provision of enough capacity on each route to carry all passengers who would select it. An algorithm is developed based on the decomposition of the problem into base allocation and surplus allocation components. The base allocation identifies a feasible solution using an (approx.) minimum number of buses. The surplus allocation is illustrated for the simple objective of minimizing the maximum crowding level on any route. The bus allocation procedure developed in this paper has been applied to part of the Cairo bus system in a completely manual procedure, and is proposed to be the central element of a short-range bus service planning process for that city.     

Bus rapid transit systems: a comparative assessment

There is renewed interest in many developing and developed countries in finding ways of providing efficient and effective public transport that does not come with a high price tag. An increasing number of nations are asking the question—what type of public transport system can deliver value for money? Although light rail has often been promoted as a popular ‘solution’, there has been progressively emerging an attractive alternative in the form of bus rapid transit (BRT). BRT is a system operating on its own right-of-way either as a full BRT with high quality interchanges, integrated smart card fare payment and efficient throughput of passengers alighting and boarding at bus stations; or as a system with some amount of dedicated right-of-way (light BRT) and lesser integration of service and fares. The notion that buses essentially operate in a constrained service environment under a mixed traffic regime and that trains have privileged dedicated right-of-way, is no longer the only sustainable and valid proposition. This paper evaluates the status of 44 BRT systems in operation throughout the world as a way of identifying the capability of moving substantial numbers of passengers, using infrastructure whose costs overall and per kilometre are extremely attractive. When ongoing lifecycle costs (operations and maintenance) are taken into account, the costs of providing high capacity integrated BRT systems are an attractive option in many contexts.     

Improvements and rationalizations of bus service in rural areas of Denmark

This paper presents an empirical investigation of the effects of marginal changes in public bus transport in rural areas. It is based on a larger study of bus services in rural areas of Denmark (Hansen, 1986). At the beginning of the 1980s, politicians suddenly demanded reductions in public expenditures. Therefore, the Regional Transportation Corporations reduced services and increased fares. However, this article shows that it is possible to meet the demand for reduced subsidy and the passengers' wishes for better service simultaneously. Where the empirical investigations show fare elasticities of about -0.2, the service elasticities seem to be numerically above 1. In the last part of the paper these findings are applied to an alternative saving policy.     

Secrets of success: assessing the large increases in transit ridership achieved by Houston and San Diego transit providers

This paper summarizes and updates the findings from an earlier study by the same authors of transit systems in Houston (all bus) and San Diego (bus and light rail). Both systems achieved unusually large increases in transit ridership during a period in which most transit systems in other metropolitan areas were experiencing large losses. Based on ridership models estimated using cross section and time series data, the paper quantifies the relative contributions of policy variables and factors beyond the control of transit operators on ridership growth. It is found that large ridership increases in both areas are caused principally by large service increases and fare reductions, as well as metropolitan employment and population growth. In addition, the paper provides careful estimates of total and operating costs per passenger boarding and per passenger mile for Houston's bus operator and San Diego's bus and light rail operators. These estimates suggest that the bus systems are more cost-effective than the light rail system on the basis of total costs. Finally, the paper carries out a series of policy simulations to analyze the effects of transit funding levels and metropolitan development patterns on transit ridership and farebox recovery ratio.