Modeling competitive multi-modal transit services: a nested logit approach

In metropolitan areas where multi-modal trips are common, modeling the combined-mode choices of travelers, and the strategic interactions between the private service operators are important issues. This study developed a novel network approach, designated as state-augmented multi-modal (SAM) network, to explicitly consider transfer behaviors and non-linear fare structures. To overcome the independence of irrelevant alternatives (IIA) assumption associated with the standard logit approach, we integrated the SAM network with the nested logit (NL) approach. Specifically, we developed a three-level NL choice model to deal with the complex and inter-related decisions in a multi-modal network: the first level focuses on combined-mode choice, the second on transfer location choice, and the third on route choice. Using this NL SAM network as a platform, we examined the effect of fare competition on company profitability as well as on overall network congestion. A case study of the ground transportation system connecting the Hong Kong International Airport to the downtown area is provided to illustrate the approach. (C) 2004 Elsevier Ltd. All rights reserved.