Partnerships in Urban Mobility: Incentive Mechanisms for Improving Public Transit Adoption

38 Pages Posted: 6 Mar 2020

See all articles by Auyon Siddiq

Auyon Siddiq

University of California, Los Angeles (UCLA) - Anderson School of Management

Christopher S. Tang

University of California, Los Angeles (UCLA) - Anderson School of Management

Jingwei Zhang

University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: February 18, 2020

Abstract

Problem Definition: Due to a decline in public transit ridership over the last decade, transit agencies across the United States are facing a financial crisis. To entice commuters to travel by public transit instead of driving personal vehicles, it is essential for municipal governments to address the “last mile” problem by providing convenient and affordable transportation between a commuter’s home and a transit station. This challenge raises an important question: Is there a cost-effective mechanism that can improve public transit adoption by solving the last mile problem?

Academic/Practical Relevance: In this paper, we present and analyze two incentive mechanisms for increasing commuter adoption of public transit. In a direct mechanism, the government provides a subsidy to commuters who adopt a “mixed mode”, which involves taking public transit and hailing rides to/from a transit station. The government funds the subsidy by imposing congestion fees on personal vehicles entering the city center. In an indirect mechanism, instead of levying congestion fees, the government secures funding for the subsidy from a private sector partner. We examine the implications of both mechanisms on relevant stakeholders. These two mechanisms are especially relevant because several jurisdictions in the U.S. have begun piloting incentive programs in which commuters receive subsidies for ride-hailing trips that begin or end at a transit station.

Methodology: We present a game-theoretic model to capture the strategic interactions among five self-interested stakeholders (commuters, public transit agency, ride-hailing plat- form, municipal government, and local private enterprises).

Results: By examining the equilibrium outcomes, we obtain three key findings. First, we characterize how the optimal interventions associated with the direct or the indirect mechanism depend on: (a) the coverage level of the public transit network; (b) the public transit adoption target; and (c) the relative strength of commuter preferences for driving over taking public transit. Second, we show that the direct mechanism cannot be budget neutral without undermining commuter welfare. However, when the public transit adoption target is not too aggressive, we find that the indirect mechanism is budget neutral, and it increases both commuter welfare and sales to the private enterprise. Finally, we show that although the indirect mechanism restricts the scope of government intervention (by eliminating the congestion fee), it can dominate the direct mechanism by leaving all stakeholders better off, especially when the adoption target is modest.

Managerial Implications: Our findings offer cost-effective prescriptions for improving urban mobility and public transit ridership.

Keywords: Public Transit, Public-Private Partnerships, Subsidies, Incentives, Mobility as a Service (MaaS)

Suggested Citation

Siddiq, Auyon and Tang, Christopher S. and Zhang, Jingwei, Partnerships in Urban Mobility: Incentive Mechanisms for Improving Public Transit Adoption (February 18, 2020). Available at SSRN: https://ssrn.com/abstract=3540566 or http://dx.doi.org/10.2139/ssrn.3540566

Auyon Siddiq (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Christopher S. Tang

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Jingwei Zhang

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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