Improving Cost Effectiveness of Financial Incentives in Managing TDM

Given declining resources, pressing problems, and environmental constraints, many government agencies, such as state departments of transportation (DOTs), metropolitan planning organizations (MPOs), and local governments, are increasingly motivated to manage demand for vehicle trips to reduce emissions of greenhouse gases, improve air quality (which is primary for this pre-proposal), mitigate congestion, and improve overall performance of their roadway systems (which is secondary for this proposal). Providing financial incentives to commuters to use alternative modes is a common element of managing transportation demand. This is preferred over other negative enforcements, such as parking fees, which are politically difficult to implement. In principle, incentives can make alternate modes much more attractive to commuters by lowering the out-of-pocket cost of travel. However, the form (cash vs. reward card, payment vs. reimbursement), amount, and structure (one-time payment vs. recurring payments) can vary and have different impacts both on the cost of an incentive program to change travel behavior and on the effectiveness of the incentive program in bringing about these changes. Although these incentives have become common during the past two decades as elements of transportation demand management (TDM) programs, limited effort has been made to understand how different ways of providing financial incentives affect commuter's mode choice. A better understanding of how these components of incentives affect their impact is critical to enhancing the performance of financial incentives as a TDM strategy. At present, employers who offer financial incentives to their employees to promote changes in travel behavior do so because these incentives, in general, have been shown to be effective and/or popular with employees. However, different ways of offering incentives have different costs to the employers, and different degrees of effectiveness. Employers who want to work with public agencies to reduce emissions or mitigate traffic congestion would benefit from knowing how to offer the most effective incentives for the smallest cost. As an example, while incentives are effective, they suffer from a "free-rider" problem of making payments to people who had already decided to change their behavior and who would have made the change whether or not they received the incentive. An incentive program that makes recurring payments for desired behavior is likely to have higher costs per free-rider than one that offers a one-time payment for a short period of performing the desired behavior. According to one study, many TDM programs receive 50 percent of their budgets from federal Congestion Mitigation Air Quality (CMAQ) Improvement funding and more than half of all expenditures are allocated to the Employer Outreach and Incentives in some way. Previous studies have been able to demonstrate how financial incentives influence the use of alternative modes of transportation, but these studies also found that the success of TDM programs is influenced by many other factors, such as the use of human resources-related incentives and location factors. Due to the level of complexity in mode shift decisions by commuters, well-designed data collection and controlled field experiments will be necessary to enhance our understanding regarding the effectiveness of various financial incentives in TDM program.


  • English


  • Status: Completed
  • Funding: $94989.00
  • Contract Numbers:


  • Sponsor Organizations:

    National Center for Transit Research

    Center for Urban Transportation Research, University of South Florida
    4202 East Fowler Avenue, CUT 100
    Tampa, FL  United States  33620
  • Project Managers:

    Volinski, Joel

  • Performing Organizations:

    National Center for Transit Research

    Center for Urban Transportation Research, University of South Florida
    4202 East Fowler Avenue, CUT 100
    Tampa, FL  United States  33620
  • Principal Investigators:

    Hillsman, Edward

    Lee, Chanyoung

  • Start Date: 20120125
  • Expected Completion Date: 0
  • Actual Completion Date: 20130831
  • Source Data: RiP Project 33067

Subject/Index Terms

Filing Info

  • Accession Number: 01525076
  • Record Type: Research project
  • Source Agency: National Center for Transit Research
  • Contract Numbers: 77947
  • Files: UTC, RIP
  • Created Date: May 21 2014 1:00AM