Enhancing financial viability and social welfare in public transportation: A study of subsidy schemes for urban rail transit systems

Qing Wang, Shoufeng Ma, Guangming Xu, Ran Yan, Xuanke Wu, Paul M. Schonfeld

Research output: Contribution to journalArticlepeer-review

Abstract

Subsidization is vital for supporting the full-life-cycle operation and sustainable development of urban rail transit (URT) systems. It is crucial for ensuring the financial viability of transit agencies, boosting ridership, and facilitating sustainable access to public transportation for urban populations. This paper analyzes three different subsidy schemes (namely, fixed subsidy, fare-based subsidy, and distance-based subsidy) for a URT system to maximize social welfare. Firstly, a benchmark model is formulated with a fixed subsidy scheme and the optimal conditions for fares, operating frequency, and subsidy are derived and determined by the Lagrange multipliers method. Two additional subsidy models are then developed based on fare and trip distance, respectively. Compared with the fixed subsidy scheme, the results show that (i) the effects and system performance of the fixed subsidy scheme are worse than for the other two subsidy schemes; (ii) the fare-based subsidy scheme has the highest social welfare and passenger utility among the three subsidy schemes; and (iii) the distance-based subsidy scheme is the most profitable and requires the least subsidy. In this paper, we explicitly derive the Karush-Kuhn-Tucker (KKT) Conditions for the three different subsidy models, providing valuable insights into the precise subsidization of URT systems. Additionally, computational experiments demonstrate the significance of adopting an appropriate subsidy scheme to maximize social welfare in public transportation.

Original languageEnglish
Article number110313
JournalComputers and Industrial Engineering
Volume193
DOIs
StatePublished - Jul 2024
Externally publishedYes

Funding

This work was supported by the Nanjing Human Resources and Social Security Bureau Science and Technology Innovation Project [No. RK104NLX22009]; Laboratory of Computation and Analytics of Complex Management Systems(CACMS) (Tianjin University) [No. YBS224002]; General Project of Philosophy and Social Science Research in Colleges and Universities of Jiangsu Province [No.TJZ223008]. This work was supported by the Nanjing University of Posts and Telecommunications Science Foundation [No. NY221037 ]; Nanjing Human Resources and Social Security Bureau Science and Technology Innovation Project [No. RK104NLX22009 ]; the National Natural Science Foundation of China [No. 72171236 ].

Keywords

  • Karush-Kuhn-Tucker (KKT) Conditions
  • Passengers’ travel behavior
  • Subsidy schemes
  • System performance
  • Urban rail transit (URT)

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