Abstract
Recently, the number of passenger of public bus transport in Japan tends to decrease due to the motorization. This condition leads to a severe management situation, including in Arao City. The deficit of bus companies operation in provision of bus services in Arao City has been covered by Arao City Government on the basis of lines subsidy, and the city allocated a number of subsidy of about 53 million yen in 2011.To solve this problem, we pay attention to incentive scheme. This study aims to construct the mathematical model of the incentive subsidy scheme considering elastic demand and this paper includes application to bus network in Arao City to analyze the utility level of incentive subsidy model.
