Optimizing Budget Allocation for Incentive-Based Active Travel Demand Management Solutions

Abstract

Incentive-based travel demand management (IBTDM) strategies utilize rewards to redistribute travel demand across space and time. Such congestion-alleviation solutions are usually managed by small private companies with constraint budgets. Aside from spending money on incentives, running promotional campaigns to achieve the gains in market share is essential for maintaining the financial health of IBTDM programs. Therefore, the budget allocation between the two counterparts—incentive and marketing expenditure—needs to be wisely determined. Based on the bottleneck model, this paper proposes an optimal budget allocation scheme considering the impact of a budget constraint and market penetration. It was found that the constraint budget should be prioritized to attract those with lower marketing costs in general. In situations with an insufficient budget and when marketing costs were lower for attracting lower-income individuals, IBTDM decision-makers should focus on those lower-income individuals at first. This mitigates inequity issues to some extent. Therefore, policy makers or planners should pay more attention to marketing cost when developing a marketing plan and try to reduce marketing cost to make full use of incentive budget.