Multi-Objective Pricing Model Application In Quasi-Public Goods Investment And Pricing

After three decades of rapid growing, the urbanization process is undergoing a bottleneck period for development. There is an increasing contradiction between the strong demand for urban development especially the quasi-public infrastructure and the strained government budget. Under this circumstance, Public-Private-Partnership investment and financing pattern came into being. Compared with traditional investment pattern, the brand new pattern is able to solve the problem of quasi-public commodity market failure and government functional disability. Our country is now undergoing market-oriented reform, and it is still far away from fully market-oriented operation. By combining market competition mechanism with government power, the PPP scheme ensures the coexistence of the quasi-public welfare and efficient operation, and will therefore be widely applied in the future for a long term.This paper compares the characteristics and applicability of the quasi-public goods for three distinct investment patterns (government investment, private investment and public-private-partnership investment). Besides, we analyze the three patterns in metro applications and point out the great advantage of public-private-partnership pattern in the operating efficiency and sustainable supply. As Public-private-partnership investment model involves multiple stakeholders (government departments, private investors and consumers). How to balance the interests and responsibilities between the main participants is the theoretical and practical foundation of designing multi-objective pricing programming model, which is the main contribution of this work.As a kind of typical quasi-public product, the operation and pricing of subway should not only follow the general principle of quasi-public product, but also take its industry particularity into account. How to balance the benefits and responsibilities among the multiple participants is the key issue in the process of operation. In this paper, we argue that we can solve this problem by building a multiple objective pricing model which includes triple targets, that is corporate interests, consumer utilities and positive externalities. We assume that government can partially convert the positive externalities generated by subway operating partially into enterprise internal efficiency with its administrative power, forming an effective incentive mechanism to promote metro supply and operational efficiencies. We also point out that the focus of subway operation should be stage dependent. In the early stages since there exits only one single line and passenger travel utility is low, appealing low fares can be set to attract passengers and cover the operation losses. In the second stage, although the skeleton of the subway system is completed and the utility of passengers enhances, the metro transit system is still dominated by the traditional public transportation system, the enterprise is suggested to continue the low fares strategy and gradually take advantage of its low marginal cost to achieve break-even balance for subway operation. When the subway network is completely formed, the passenger utility is so high enough that passengers rely heavily on subway system when travelling. Economy of scale implies that the enterprises can appropriately raise subway fares to ensure corporate profits.In this paper, we conduct a detail analysis on the specific application of public-private-partnership in Hangzhou Metro Line1. The travelling characteristics of Metro Line1and their travel utility are investigated through questionnaire survey. The survey result and relevant historical data collected from literatures and internet are analyzed.We summarize our conclusion as below: The operational inefficiencies and the intense mismatch between supply and demand can be solved through innovative PPP investment model, which is first proposed in western countries. Its intrinsic advantages and successful practice can provide a reference for china’s urban development. And we can balance the benefits and responsibilities between the multiple participants in PPP project. Besides, based on the analysis of multi-objective pricing model, we pointed out the problem in current pricing scheme and provide some recommendations on relevant policy.In this paper, we combine the theoretical and empirical analysis with data obtained from questionnaires. In this way, we guarantee that our findings are convincing.