Modeling Bus Service under Competition and Regulation

Abstract

This paper considers transportation service of a bus route with a capacity constraint. The conventional demand-supply equilibrium model is adopted to determine demand, service quality, and profit of the operator and total social welfare in terms of the bus fare and bus fleet size. A simple numerical realization and graphical characterization of a wide variety of industry equilibria in a bus fleet-fare 2D space are presented. The 2D representation in this study allows for intuitive visualization of the various possibilities of profitability and welfare gain of the bus route under competition and regulation. It thus provides a convenient way to help the private sector identify how, and under what circumstances, a bus route service is feasible and profitable and to assist the public sector in understanding how the bus route service will benefit the private operator, the passengers, and the whole society.