Non-cooperative and cooperative solutions of government subsidy on public transportation

Abstract

The paper deals with two models of government subsidy given to a public transport operator: (i) the subsidy for buying bus from an appointed public transport manufacturer, and (ii) the subsidy for reimbursing reduced ticket price for passengers. The models are developed to determine the maximum profit for both the public transport operator and the manufacturer. Since we consider two parties – the public transport operator and the manufacturer of the bus, then we use game theoretical approach by considering non-cooperative and cooperative solutions. Furthermore, since the bus is repairable we consider virtual age to model the preventive maintenance and we consider minimal repair to model the corrective maintenance. We analyse both type of subsidy models and give some numerical examples which show the effects of different subsidies to the profit of operator and manufacturer. The result of the numerical examples indicates that reducing ticket price would give a higher profit both to the operator and the manufacturer.