Value-of-time distributions and competitive bus services

The effect of value-of-time (VOT) distributions on price and quality competition among differentiated bus services in a simple corridor is investigated. Three travel modes are considered: private car; higher-quality, higher-fare minibuses; and lower-fare, lower-quality conventional buses. With a given continuous distribution of VOT, users are assumed to minimize individual generalized trip cost and divide themselves among the three travel modes that are differentiated in travel time and monetary cost. Competitive equilibrium is established in terms of each bus firm's optimal frequency and optimal fare; also, the profitability of the two types of bus service is examined.