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Designing an Optimal Subsidy Scheme to Reduce Emissions for a Competitive Urban Transport Market

Author

Listed:
  • Feifei Qin

    () (School of Urban Rail Transit, Soochow University, Suzhou 215006, China)

  • Xiaoning Zhang

    () (School of economics and management, Tongji University, Shanghai 200092, China)

Abstract

With the purpose of establishing an effective subsidy scheme to reduce Greenhouse Gas (GHG) emissions, this paper proposes a two-stage game for a competitive urban transport market. In the first stage, the authority determines operating subsidies based on social welfare maximization. Observing the predetermined subsidies, two transit operators set fares and frequencies to maximize their own profits at the second stage. The detailed analytical and numerical analyses demonstrate that of the three proposed subsidy schemes, the joint implementation of trip-based and frequency-related subsidies not only generates the largest welfare gains and makes competitive operators provide equilibrium fares and frequencies, which largely resemble first-best optimal levels but also greatly contributes to reducing Greenhouse Gas (GHG) emissions on major urban transport corridors.

Suggested Citation

  • Feifei Qin & Xiaoning Zhang, 2015. "Designing an Optimal Subsidy Scheme to Reduce Emissions for a Competitive Urban Transport Market," Sustainability, MDPI, Open Access Journal, vol. 7(9), pages 1-16, August.
  • Handle: RePEc:gam:jsusta:v:7:y:2015:i:9:p:11933-11948:d:54870
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    References listed on IDEAS

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    Cited by:

    1. Wendan Zhang & Jian Lu & Ping Xu & Yi Zhang, 2015. "Moving towards Sustainability: Road Grades and On-Road Emissions of Heavy-Duty Vehicles—A Case Study," Sustainability, MDPI, Open Access Journal, vol. 7(9), pages 1-28, September.
    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, Open Access Journal, vol. 11(18), pages 1-1, September.
    3. Daming You & Ke Jiang & Zhendong Li, 2018. "Optimal Coordination Strategy of Regional Vertical Emission Abatement Collaboration in a Low-Carbon Environment," Sustainability, MDPI, Open Access Journal, vol. 10(2), pages 1-1, February.
    4. Wenqian Zou & Meichen Yu & Shoshi MIZOKAMI, 2019. "Mechanism Design for an Incentive Subsidy Scheme for Bus Transport," Sustainability, MDPI, Open Access Journal, vol. 11(6), pages 1-1, March.

    More about this item

    Keywords

    optimal subsidy scheme; two-stage Game; degenerate nested Logit model; GHG emission reduction;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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