MANAGING THE URBAN TRANSIT SYSTEM VIA BUS TOLLING

For transit services operated by competitive private companies, as in Hong Kong, their profit-maximizing objectives may conflict with the government objective of, among others, maintaining the network congestion at an acceptable level. These high-level objectives need to be duly considered in formulating a balanced transportation management strategy. Other than engaging in a Bertrand Game, companies may also compete via their service frequencies. As the roadway infrastructure is provided for free by the government, as long as the fare collection can recover the marginal cost of operating a bus, companies would send all their buses roaming the roadway network, leading to an oversupply of bus services and added congestion. How should society go about managing the congestion externality of bus services resulting from the competition? This study aims to analyze such externality pricing through bus tolling. The result shows that bus tolling can be a promising congestion management tool