114 / 2017-06-07 22:48:04

Pricing and Subsidy Strategies in a Cross-Border Transit System

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With the development of urban agglomeration economy, the cross-border transit systems have been formed to improve the inter-regional transit travels in many cities and regions of China. This paper adopts a bi-level programming model to investigate the pricing and subsidy strategies in a cross-border transit system. In the lower-level problem, the transit operators in adjacent regions jointly operate the cross-border transit line. They compete with each other to maximize their own profits by deciding their frequencies. In the upper-level problem, the transit authorities in these regions are consolidated to manage the cross-border transit line. They cooperate with each other to maximize the social welfare by deciding the transit fare and subsidy. In addition, the passengers’ response to the generalized transit cost is especially considered in the proposed model. Numerical studies show that the transit fare has more important effects on the profits of operators compared to the transit subsidy. The subsidy can obviously improve the benefits of passengers. The pricing and subsidy should be flexibly combined to manage the cross-border system.