Effects of Subsidies on Optimized Bus Transportation

This thesis analyzes and compares the effects of different objectives and financial constraints on conventional and flexible route bus systems, with special emphasis on the relation between subsidy and social welfare. Social welfare is the sum of producer surplus (profit) and consumer surplus and provides a good measure of overall net benefits. The optimization models are developed for conventional and flexible route bus systems, connecting a Central Business District (CBD) and a suburban area. Reflecting the current major financial policy concerns of bus transit systems, these models are designed to maximize: (1) operator profit or (2) social welfare with various financial constraints (i.e., break-even, given subsidy, and unconstrained subsidy). The values of the optimized decision variables (i.e., headway, bus route spacing, service area, and fare) are found for achieving those objectives. The most interesting results indicate that as subsidies increase, the social welfare increases much less than proportionally, for either type of bus service and for practically all circumstances considered. Sensitivity analyses are conducted for the effects of input parameters (i.e., potential demand densities, bus speeds, line-haul distances, and elasticity parameters) on optimized results (i.e. decision variables, objectives, and change ratio in optimized social welfare). These analyses provide useful guidelines for policy makers in determining efficient bus system designs and financial policies under various circumstances.