IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2019i6p1740-d216275.html
   My bibliography  Save this article

Mechanism Design for an Incentive Subsidy Scheme for Bus Transport

Author

Listed:
  • Wenqian Zou

    (Economics and Management College, Civil Aviation University of China, Tianjin 300300, China)

  • Meichen Yu

    (Economics and Management College, Civil Aviation University of China, Tianjin 300300, China)

  • Shoshi MIZOKAMI

    (Graduate School of Science and Technology, Kumamoto University, Kumamoto 860-8555, Japan)

Abstract

Large public transport subsidies necessitated by operating deficits have become a heavy financial burden on some local governments. However, the present subsidy scheme lacks incentives to encourage bus operators to reduce deficits to lessen subsidies. In order to motivate bus operators to exert their roles in reducing these subsidies to ensure sustainable finance, this paper designs an incentive subsidy scheme based on the Laffont–Tirole model. This scheme is designed to motivate bus operators to endeavor to reduce deficits so as to obtain a premium, thus minimizing the total amount of subsidies and maximizing social benefit. The case of the bus network in Kumamoto, Japan, shows how, with this subsidy scheme, bus operators can play roles in lessening subsidies, allowing a win-win situation for both bus operators and the local government, and maximizing social benefit to realize the sustainability of the city. Finally, findings of our sensitivity analysis with imperfect information suggest that the length of bus lines in a network should be shortened in order to avoid cost waste to lessen subsidies.

Suggested Citation

  • Wenqian Zou & Meichen Yu & Shoshi MIZOKAMI, 2019. "Mechanism Design for an Incentive Subsidy Scheme for Bus Transport," Sustainability, MDPI, vol. 11(6), pages 1-13, March.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:6:p:1740-:d:216275
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/6/1740/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/11/6/1740/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Feifei Qin & Xiaoning Zhang, 2015. "Designing an Optimal Subsidy Scheme to Reduce Emissions for a Competitive Urban Transport Market," Sustainability, MDPI, vol. 7(9), pages 1-16, August.
    2. Kavanagh, Peter, 2016. "A case for negotiated performance-based contracting rather than competitive tendering in government public transport (bus) service procurement," Research in Transportation Economics, Elsevier, vol. 59(C), pages 313-322.
    3. Sun, Chuanwang & Zhu, Xiting, 2014. "Evaluating the public perceptions of nuclear power in China: Evidence from a contingent valuation survey," Energy Policy, Elsevier, vol. 69(C), pages 397-405.
    4. David A. Hensher & Paola Prioni, 2002. "A Service Quality Index for Area-wide Contract Performance Assessment," Journal of Transport Economics and Policy, University of Bath, vol. 36(1), pages 93-113, January.
    5. Gordan Stojić & Dušan Mladenović & Olegas Prentkovskis & Slavko Vesković, 2018. "A Novel Model for Determining Public Service Compensation in Integrated Public Transport Systems," Sustainability, MDPI, vol. 10(9), pages 1-20, August.
    6. Philippe Gagnepain & Marc Ivaldi, 2002. "Incentive Regulatory Policies: The Case of Public Transit Systems in France," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 605-629, Winter.
    7. Hensher, David A. & Stanley, John, 2010. "Contracting regimes for bus services: What have we learnt after 20 years?," Research in Transportation Economics, Elsevier, vol. 29(1), pages 140-144.
    8. Daraio, Cinzia & Diana, Marco & Di Costa, Flavia & Leporelli, Claudio & Matteucci, Giorgio & Nastasi, Alberto, 2016. "Efficiency and effectiveness in the urban public transport sector: A critical review with directions for future research," European Journal of Operational Research, Elsevier, vol. 248(1), pages 1-20.
    9. Warren Young & Joris Meijaard, 2002. "Political Culture, Economic Structure and Policy: The Laffont‐Tirole Model Extended to Modern Japan," American Journal of Economics and Sociology, Wiley Blackwell, vol. 61(1), pages 301-326, January.
    10. Gatta, Valerio & Marcucci, Edoardo, 2007. "Quality and public transport service contracts," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 36, pages 92-106.
    11. Karlaftis, Matt G. & McCarthy, Patrick, 1998. "Operating subsidies and performance in public transit: an empirical study," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(5), pages 359-375, September.
    12. Mathisen, Terje Andreas, 2016. "Competitive tendering and cross-shareholding in public passenger transport," Transport Policy, Elsevier, vol. 48(C), pages 45-48.
    13. Steve Parsons, 2002. "Laffont and Tirole's Competition in Telecommunications : A View From the US," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 419-436.
    14. Eboli, Laura & Mazzulla, Gabriella, 2011. "A methodology for evaluating transit service quality based on subjective and objective measures from the passenger's point of view," Transport Policy, Elsevier, vol. 18(1), pages 172-181, January.
    15. Robert A. Simons & Kimberly Winson-Geideman, 2005. "Determining Market Perceptions on Contamination of Residential Property Buyers using Contingent Valuation Surveys," Journal of Real Estate Research, American Real Estate Society, vol. 27(2), pages 193-220.
    16. Mouwen, Arnoud & van Ommeren, Jos, 2016. "The effect of contract renewal and competitive tendering on public transport costs, subsidies and ridership," Transportation Research Part A: Policy and Practice, Elsevier, vol. 87(C), pages 78-89.
    17. Hensher, David A. & Houghton, Erne, 2004. "Performance-based quality contracts for the bus sector: delivering social and commercial value for money," Transportation Research Part B: Methodological, Elsevier, vol. 38(2), pages 123-146, February.
    18. Sakai, Hiroki & Shoji, Kenichi, 2010. "The effect of governmental subsidies and the contractual model on the publicly-owned bus sector in Japan," Research in Transportation Economics, Elsevier, vol. 29(1), pages 60-71.
    19. Hensher, David A. & Stanley, John, 2003. "Performance-based quality contracts in bus service provision," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(6), pages 519-538, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Luo, Qingyu & Bing, Xue & Jia, Hongfei & Song, Jinge, 2022. "An incentive subsidy mechanism for bus lines based on service level," Transport Policy, Elsevier, vol. 126(C), pages 1-13.
    2. Janez Blaž & Klemen Zajc & Samo Zupan & Miha Ambrož, 2019. "Evaluation System for the Implementation of Public Passenger Transport as a Public Service Obligation," Sustainability, MDPI, vol. 11(12), pages 1-17, June.
    3. Chunqin Zhang & Yuting Hu & Anning Ni & Hongwei Li, 2019. "Compensation Scheme for Self-Employed Bus Service Requisitions in Urban–Rural Passenger Transport," Sustainability, MDPI, vol. 11(18), pages 1-20, September.
    4. Qidan Hu & Ying Peng & Chunxiang Guo & Dong Cai & Peiyang Su, 2019. "Dynamic Incentive Mechanism Design for Recycling Construction and Demolition Waste under Dual Information Asymmetry," Sustainability, MDPI, vol. 11(10), pages 1-24, May.
    5. Shiqian Ji & Jiaming Zhong & Zhaocheng He, 2022. "A Bus Subsidy Scheme Design Model Considering Competition between Bus Companies," Sustainability, MDPI, vol. 14(7), pages 1-19, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sheng, Dian & Meng, Qiang, 2020. "Public bus service contracting: A critical review and future research opportunities," Research in Transportation Economics, Elsevier, vol. 83(C).
    2. Sepúlveda, Juan Pablo & Galilea, Patricia, 2020. "How do different payment schemes to operators affect public transport concessions? A microeconomic model," Transport Policy, Elsevier, vol. 93(C), pages 27-35.
    3. Canıtez, Fatih & Çelebi, Dilay & Deveci, Muhammet & Kuvvetli, Yusuf, 2019. "Selecting an optimal contractual payment model for Istanbul's public bus operators using non-linear mathematical programming," Research in Transportation Economics, Elsevier, vol. 76(C).
    4. Ling, Shuai & Jia, Ning & Ma, Shoufeng & Lan, Yanfei & Hu, Wandi, 2019. "An incentive mechanism design for bus subsidy based on the route service level," Transportation Research Part A: Policy and Practice, Elsevier, vol. 119(C), pages 271-283.
    5. Avenali, Alessandro & Catalano, Giuseppe & D'Alfonso, Tiziana & Matteucci, Giorgio, 2020. "The allocation of national public resources in the Italian local public bus transport sector," Research in Transportation Economics, Elsevier, vol. 81(C).
    6. Nayan, Ashish & Wang, David Z.W., 2017. "Optimal bus transit route packaging in a privatized contracting regime," Transportation Research Part A: Policy and Practice, Elsevier, vol. 97(C), pages 146-157.
    7. Mokonyama, Mathetha & Venter, Christoffel, 2013. "Incorporation of customer satisfaction in public transport contracts – A preliminary analysis," Research in Transportation Economics, Elsevier, vol. 39(1), pages 58-66.
    8. Epstein, Bryan & Givoni, Moshe, 2016. "Analyzing the gap between the QOS demanded by PT users and QOS supplied by service operators," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 622-637.
    9. Juan de Oña & Rocio de Oña, 2015. "Quality of Service in Public Transport Based on Customer Satisfaction Surveys: A Review and Assessment of Methodological Approaches," Transportation Science, INFORMS, vol. 49(3), pages 605-622, August.
    10. Shiqian Ji & Jiaming Zhong & Zhaocheng He, 2022. "A Bus Subsidy Scheme Design Model Considering Competition between Bus Companies," Sustainability, MDPI, vol. 14(7), pages 1-19, April.
    11. Cinzia Daraio & Marco Diana & Flavia Di Costa & Claudio Leporelli & Giorgio Matteucci & Alberto Nastasi, 2014. "Efficiency and effectiveness in the urban public transport sector: a critical review with directions for future research," DIAG Technical Reports 2014-14, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    12. Tiznado, Ignacio & Galilea, Patricia & Delgado, Felipe & Niehaus, Markus, 2014. "Incentive schemes for bus drivers: The case of the public transit system in Santiago, Chile," Research in Transportation Economics, Elsevier, vol. 48(C), pages 77-83.
    13. Mouwen, Arnoud & Rietveld, Piet, 2013. "Does competitive tendering improve customer satisfaction with public transport? A case study for the Netherlands," Transportation Research Part A: Policy and Practice, Elsevier, vol. 51(C), pages 29-45.
    14. Chaparro, Alejandra & Galilea, Patricia & Muñoz, Juan Carlos & Poblete, Joaquín, 2020. "Application of an incentive for bus drivers to achieve an improvement in the quality of service," Research in Transportation Economics, Elsevier, vol. 83(C).
    15. Feifei Qin & Xiaoning Zhang, 2015. "Designing an Optimal Subsidy Scheme to Reduce Emissions for a Competitive Urban Transport Market," Sustainability, MDPI, vol. 7(9), pages 1-16, August.
    16. dell'Olio, Luigi & Ibeas, Angel & Cecín, Patricia, 2010. "Modelling user perception of bus transit quality," Transport Policy, Elsevier, vol. 17(6), pages 388-397, November.
    17. Benedetto Barabino & Nicola Aldo Cabras & Claudio Conversano & Alessandro Olivo, 2020. "An Integrated Approach to Select Key Quality Indicators in Transit Services," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(3), pages 1045-1080, June.
    18. Jan U. Becker & Sönke Albers, 2016. "The limits of analyzing service quality data in public transport," Transportation, Springer, vol. 43(5), pages 823-842, September.
    19. Benedetto Barabino, 2018. "Automatic recognition of “low-quality” vehicles and bus stops in bus services," Public Transport, Springer, vol. 10(2), pages 257-289, August.
    20. Concepcion Roman & Juan Carlos Martin & Raquel Espino, 2011. "Using Stated Preferences (Sp) To Analyze The Service Quality Of Public Transport," ERSA conference papers ersa11p86, European Regional Science Association.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2019:i:6:p:1740-:d:216275. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.