How public transport subsidy policies in China affect the average passenger load factor of a bus line

Document Type

Journal Article

Publication Date


Subject Area

place - asia, mode - bus, economics - subsidy, ridership - demand


Public transport, Average passenger load factor, Subsidy policy, Inventory theory


This study applies inventory theory to illustrate the internal relationship between the average passenger load factor and choice of public transport subsidy policy by the government. Subsidy policies are broadly classified into four types: fixed amount subsidy, passenger volume subsidy, vehicle trip subsidy, and incentive mechanism subsidy. A bus supply model with the objective of minimizing expected loss is formulated with demand considered to be a continuous random variable. We then analyse, using numerical examples, how the four subsidy policies affect the model-related parameters and the average passenger load factor. Results show that, in terms of reducing the average passenger load factor, the fixed-amount subsidy has no effect while the passenger volume subsidy and vehicle trip subsidy have limited effects, although the latter is more effective than the former. Further, the incentive mechanism subsidy requires an appropriate unit penalty value to reach the appropriate average passenger load factor. A combination of the vehicle trip subsidy and an appropriate incentive mechanism subsidy is the most effective method to improve the average passenger load factor. However, the effectiveness is constrained by the bus supply capacity.


Permission to publish the abstract has been given by Elsevier, copyright remains with them.


Research in Transportation Business & Management Home Page: