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Mechanism Design for an Incentive Subsidy Scheme for Bus Transport

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  • 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
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    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.

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