Regulating competition between transit and ride-hailing with transit priority zones

The thriving ride-hailing (RH) industry over the last decade provides passengers with flexible mobility options but also stimulates discussions about the possible cannibalization of public transport (PT) ridership. To foster PT and improve system efficiency, we propose a novel transit priority policy in which areas within a less-than-threshold distance to PT stops are announced as transit priority zones (TPZs). Passengers originating from TPZs must walk out of TPZs to hail rides unless exemption. However, RH services can still drop passengers within TPZs. Our model captures the interplay between passengers’ mode choices and both modes’ trip costs. We adopt an equilibrium-based approach to model passengers’ model choices in a stylized bi-modal system with a grid PT network. Passengers choose either PT or RH services, based on the mode-specified trip costs. Inversely, the trip costs of both modes are influenced by the modal split. Our model features a private RH agency that adjusts the price to maximize the net revenue. Under our settings, we prove theoretically that both the price and the total revenue of RH services are decreasing in the TPZ radius. We find numerically that TPZs help reduce the average cost for both PT and RH trips. However, the modal shift effect tends to be marginal when the RH agency adjusts the RH price to maximize its revenue. To further strengthen the policy's impact, we consider a scenario where the RH agency offers first-mile and last-mile connection services within TPZs. This service enables passengers to use RH to reach PT stops, thus integrating RH and PT modes more effectively. Our numerical analysis indicates that providing such connection services not only enhances the impact of TPZs on the modal split but also preserves the effectiveness regarding reducing the system cost.