Resumen
Recently, number of bus users decreases by some reasons in Japan, e.g., the progress of motorization, depopulation and so on. Under such situation, local government may subsidize a bus company, which operates in the red, for sustaining public transportation service to the residents. Such bus company is hardly motivated to reduce its deficit since the present subsidy system in Japan compensates for almost the same amount as the deficit. For the purpose of motivating the bus company to reduce the deficit, the incentive reward institution is employed in this study. In the institution, the bus company can gain incentive reward from the local government if the deficit decreases. This study aims at developing an economic welfare maximization model by taking the incentive reward institution into account. The model was applied to a real bus company in Hokkaido, Japan, and some alternative scenarios for the company were evaluated in terms of the economic welfare.