Competition between the transportation network company and the government with subsidies to public transit riders

Document Type

Journal Article

Publication Date


Subject Area

economics - subsidy, economics - profitability, ridership - behaviour, policy - equity


Ride-sourcing, Public transits, Game-theoretic mode, lCoopetition


The substitution and complement of ride-sourcing services and public transit services greatly affect the mobility and accessibility of a multi-modal transportation system. Since the transportation network company (TNC) (operator of ride-sourcing) concerns the profit and the government (operator of public transit) promotes social welfare, the two policy-makers will both cooperate and compete with each other to enhance their benefits. In this paper, we develop a bi-level game-theoretic approach to model the cooperative and competitive relationship between the TNC and the government. In the upper level, the two policy-makers design a cooperative plan such that the government provides subsidies to public transit riders who use ride-sourcing to solve first- or last-mile problems. In the lower level, they attempt to optimize operational strategies to compete with each other for achieving their objectives. The outcome of the bi-level game depends on passengers’ choices among alternative travel modes, which is characterized by an aggregate multi-modal market. Based on the proposed game-theoretic approach, we analytically and numerically examine the impact of the competition with passenger-side subsidies on the multi-modal system, and the existence of optimal strategies that lead to a win–win situation for both the policy-makers. We find that a socially-optimal subsidy level may exist. In areas with high public transit accessibility, a good-intentioned subsidy that boosts first- or last-mile ride-sourcing services can reduce the TNC’s profit. Our research highlights the value of a carefully designed subsidy structure that benefits both the TNC (profit) and the society (social welfare), especially in areas with low public transit accessibilities.


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


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