Pareto efficient strategies for regulating public transit operations

Document Type

Journal Article

Publication Date


Subject Area

operations - performance, operations - frequency, operations - crowding, planning - service level, place - asia


Transit regulation, Pareto, efficient frontier, Quantity control, Congestion


This paper investigates how the local authorities could efficiently regulate the public transit, which is operated by a private firm. Both the waiting time at stops and the in-vehicle congestion costs are taken into account to reflect the transit service quality. The Pareto-efficient frontier is derived and three types of regulation strategies, namely Price-cap, Return-on-output and Quantity control, are analyzed and compared. On one hand, although the Price-cap regulation can attract more demand effectively, the private firm will inefficiently supply a lower frequency to keep the cost down. On the other hand, both the Return-on-output (ROO) and Quantity-control regulations are Pareto efficient that can keep the transit system operating along the Pareto-efficient frontier. Especially, Quantity-control regulation seems to be more attractive than ROO as there is no need for the firm’s accounting information. In addition to the investigations on regulation, a new optimal demand-frequency correspondence is also derived that extends the Mohring’s “Square Root Principle” in incorporating transit in-vehicle congestion effects.


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