Equity-aware Design and Timing of Fare-free Transit Zoning under Demand Uncertainty

Abstract: We propose the first analytical stochastic model for optimizing the configuration and implementation policies of fare-free transit. The model focuses on a transportation corridor with two transportation modes: automobiles and buses. The corridor is divided into two sections, an inner one with fare-free transit service and an outer one with fare-based transit service. Under the static version of the model, the optimized length and frequency of the fare-free transit zone can be determined by maximizing total social welfare. The findings indicate that implementing fare-free transit can increase transit ridership and reduce automobile use within the fare-free zone while social equity among the demand groups can be enhanced by lengthening the fare-free zone. Notably, the optimal zone length increases when both social welfare and equity are considered jointly, compared to only prioritizing social welfare. The dynamic model, framed within a market entry and exit real options approach, solves the fare policy switching problem, establishing optimal timing policies for activating or terminating fare-free service. The results from dynamic models reveal earlier implementation and extended durations of fare-free transit in the social welfare-aware regime, driven by lower thresholds compared to the social equity-aware regime.