Improving Cost Effectiveness of Financial Incentives in Managing TDM

(Center Identification Number: 77947-00)

Principal Investigators:

Chanyoung Lee, Senior Research Associate

Phone: 813-974-4910
Fax: 813-974-5168


Ed Hillsman, Senior Research Associate

Phone: 813-974-2977
Fax: 813-974-5168

Center for Urban Transportation Research
University of South Florida

External Project Contact:

Michael Wright
Statewide CAP and Florida RTAP Manager, Florida Deparment of Transportation
Phone: 850-414-4529

I.  Project Objective/Problem Statement/Background

Given declining resources, pressing problems, and environmental constraints, many government agencies, such as state DOTs, 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.

II. Objectives/Tasks

The objective of this study is to understand how the elements (form, amount, and structure) of financial incentives determine their effectiveness in changing commuting behavior and to investigate the process of developing a habitual mode choice behavior. This research will draw on behavioral economics, empirical data, and a controlled field experiment with commuters to understand these relationships. The goal is to improve the cost-effectiveness of financial incentives as a tool for transportation agencies to use in transportation demand and reducing emissions.

The tasks of this study are as follows:

• Perform a literature review to produce a synthesis of effectiveness of different financial incentive schemes for promoting the use of alternative commuting modes and the effects of rational and habitual factors on mode choice behaviors.

• Identify the employer/agencies willing to participate and conduct a web based survey with employees to collect their stated preference information related to financial incentives and mode choice.

• Develop and conduct a controlled field experiment with different financial incentives.

• Analyze the results of the controlled field experiment and summarize findings.

The scope of services for this project consists of the following supporting tasks:

Task 1: Conduct Literature Review

The research team will conduct a thorough literature review to investigate the effectiveness of financial incentives for promoting other forms of commuting change. This task will study and summarize the effectiveness of different types of financial incentives offered by the largest TDM programs such as the Washington State CTR (Commute Trip Reduction) program and Cash for Commuter (CFC) program in the state of Georgia. Also, the effects of rational and habitual factors influencing the mode choice behaviors will be studied and summarized. The research team will also look outside the TDM/mode choice literature to understand the impact of various incentive schemes in changing human behavior.

Task 2: Development of the Web-Based Stated Preference Survey

To identify the potential participants, the research team plans to contact Florida’s Commuter Assistance Programs (CAP’s), FDOT district offices, and employers in the downtown area of the selected region. In addition, an email database of registered vehicle owners in Florida will be obtained from Department of Highway Safety and Motor Vehicles (DHSMV) and used to disseminate the developed web-based survey. The survey aims to understand their eligibility and interest in the incentive program. Figure 1 shows the recruiting process for the incentive program. Based on the findings from the literature review, a web-based stated preference survey will be developed with an aim to capture the following information:

• Current work schedule (start time & end time) and commute mode, including recent history

• Alternative mode availability/preference and trip diary

• Stated preference towards incentive schemes (form, amount, and structure) and factors attracting employees towards different incentive schemes

• Demographic information

Also, a control group will be used to monitor the potential external factors that could have an effect on mode shift behavior during the study period. The incentive schemes can only control for the incentives and not for other factors that can affect the mode change behavior. For example: change in gas prices can lead to a commute mode shift irrespective of the incentive. The control group will help capture the impact of factors affecting the mode change behavior, which are not considered in this experiment. The survey for the control group will be similar to the web-based survey, but without incentive information/preference. It captures information on their current work schedule, commute mode, alternative mode availability/preference, and any changes during the study period. At least two surveys with the group are expected.

Deliverable: A technical memorandum of the findings will be furnished to FDOT electronically.

Task 3: Development of Controlled Field Experiment with Different Financial Incentives

In this task, the information obtained from the web-based survey will be used to identify the potential employees for the incentive experiments. The study team will develop criteria based on the parameters, such as number of interested employees, commute time, and cost differences with alternate mode, etc., to identify the potential eligible employees. This task will work towards designing a controlled field experiment to evaluate the effectiveness of different variants of financial incentives to influence commuter behavior. The research team will also design the rules and program guidelines specific to each incentive scheme and alternative commute mode for the controlled field experiment.

Based on various TDM programs and past psychological research, the research team plans to evaluate the following incentive schemes:

P1. Modest, but continuous, recurring payments

P2. Significant up-front payment.

In the P1 incentive scheme, participants can receive an incentive per day for each day they use an alternative commute mode within the consecutive 90-day period; whereas in the P2 incentive scheme, participants can receive an upfront incentive each month. Each participant will have an obligation to use the alternative mode for a specific number of days in a month to qualify for the next month upfront incentive.

The financial incentive schemes (amount, payment criteria, and structure) and the commute mode choices (mostly transit and carpool) for the controlled field experiment will be finalized based on the web-based survey. Based on the power analysis and two-group design , the minimum sample size required for the each incentive scheme and control group should be between 26 to 58 participants. The sample size for each incentive scheme and control group will be finalized based on the statistical significance required and the results of the web-based survey. The research team will interact with CAP’s to use their existing Emergency Ride Home (free taxi service) for registered participants in case of unexpected emergency. Each participant can take a limited number of free rides during the controlled field experiment.

Task 4: Conduct the Controlled Field Experiment

Once the incentive schemes and program guidelines are finalized, the research team will conduct a controlled quasi-experiment. The eligible employees identified using the web-based survey will be randomly assigned to one of the incentive schemes and will be asked to fill in the online registration form if they accept the scheme. The controlled field experiment will be conducted over a six-month period. The registration will be open for the first three months until the required sample size for each incentive scheme is met. Each registered participant can earn the financial incentive by using the qualified commute alternative to travel to and from work within the consecutive 90-day period. During the 90-day period, the participants will be asked to log their commute behavior either online or on paper. The research team plans to involve the manager or supervisor of the participant in the experiment for the validation of the travel logs submitted by the participants.

After the six-month period, the experiment will be evaluated based on parameters such as auto trip rate (before and after), changes in vehicle miles travelled, carbon saving etc. All this information will be obtained through the online or paper commute logs completed by the participants.

After the 90-day period, the experiment will be assessed by conducting monthly web-based surveys or interviews for three consecutive months to track commuting behavior. The web-based assessment surveys or interviews will help understand the persistence of short-term changes in travel behavior of the participants. The structure of the assessment survey may be as follows:

• General work schedule of the participant

• Current commute to work (mode used, how many days, if stopped-reason, motivation to change etc.)

• Commute during the incentive program

• Commute before the incentive program

• Demographics of the participant

The exact structure of the web-based assessment survey or interview will be finalized during this task.

Task 5: Analyze the Result of Controlled Field Experiment

The results of the controlled field experiments will be analyzed and summarized with an advanced multivariate tree analysis. Specifically, the CUTR team will evaluate the number of commuters who change their commuting mode under different types of financial incentives and the commuter’s perception of different amounts of financial incentives. The effort will focus on finding a reasonable explanation for the role of financial incentives in an individual’s decision to change his/her mode for commuting with the proposed TDM program. The results of the web assessment survey will help us compare and discuss the advantage/disadvantage of each incentive scheme, including free-rider issues.

Task 6: Summary of Findings and Draft Final Report

The final task of the research will summarize the results of the previous tasks in a final report. The report will be designed in a clear and concise summary format that will facilitate easy reading and application by FDOT project managers and public transit professionals.

The draft final report will be edited for grammar, clarity, organization, and readability by the director of the National Center for Transit Research prior to submission to the Department for technical approval. The editor providing the review will sign a cover sheet attesting to such review prior to submission. The provision for editorial services will be the Principal Investigator’s responsibility (the author or a designated party may perform the review). A well-written, high-quality report will be submitted. The only changes allowable between the draft final report and the final report will be those changes requested by the Project Manager and the Research Center.

CUTR will coordinate the project with the project manager to ensure that the scope and activities are consistent with Florida DOT’s Public Transit Office’s goals and objectives. Work not included in this Scope of Service is not to be performed and will not be subject to compensation by the Department.

III. Deliverables

Deliverables for this project include a kick-off meeting, progress reports, draft final reports, a closeout meeting, and final reports, as outlined below.

Kick Off Meeting

A kick-off meeting shall be scheduled to occur within the first 30 days of execution by the university. The preferred method for the kick-off meeting is via teleconference or video conference. As a minimum, the project manager and the principal investigator will attend. The Research Center staff must be advised of the meeting a given the option to attend. Other parties may be invited, as appropriate. The subject of the meeting will be to review and discuss the project’s tasks, schedule, milestones, deliverables, reporting requirements, and deployment plan. A summary of the kick-off meeting shall be included in the first progress report.

Progress Reports

The Contractor shall submit quarterly progress reports to the Research Center according to calendar quarters (Jan-Mar; Apr-Jun; Jul-Sep; Oct-Dec). The first report will cover the activity that occurred in the Quarter following the issuance of the task work order. Reports should be submitted within 30 days of the end of the reporting period. Reports are due even if little or no progress has occurred (in which case, the report should explain delays and/or lack of progress).

Progress reports must include the following information:

1. Contract Number, Work Order Number and Title,

2. Work performed during the period being reported,

3. Work to be performed in the following period,

4. Anticipated modifications (i.e., to funding, schedule, or scope), and

5. A Progress Schedule (Figures A, B, and C) updated to reflect activities for the

period being reported.

To effectively track the project-related emails, the project contract number and title are required in the subject of the email to FDOT Project Managers.

Failure to submit progress reports in a timely manner may result in termination of the work order.

Draft Final Reports

The Draft Final Report is due 90 days prior to the end date of the task work order. The draft final report will be submitted to Sandra Bell at It should be edited for technical accuracy, grammar, clarity, organization, and format prior to submission to the Department for technical approval. The Research Center expects the Contractor to be able to provide well-written, high-quality reports that address the objectives defined by the scope of service.

Draft final reports must be prepared in accordance with the Guidelines for Preparing Draft Final and Final Reports

( This document provides information on all report requirements, including format requirements, the technical report documentation form, disclaimer language, and so forth.

Closeout Meeting

A closeout meeting shall be scheduled to occur within the final 30 days of the project. The purpose of the closeout meeting is to conduct a project performance review, discuss the deployment plan, and next steps. Attendees shall include, as a minimum, the project manager, the principal investigator, and the Research Center performance coordinator.

Final Reports

Once the draft final report has been approved, the university shall prepare the final report. The university will deliver a minimum eight (8) copies of the final report in MS Word on CD, no later than the end date of the task work order to:

The Florida Department of Transportation

Research Center, MS 30

605 Suwannee Street

Tallahassee, FL32399-0450

Each copy will be provided on a CD or DVD (i.e., for a total of eight disks). The project manager will review the final report to ensure that all issues identified for correction in the draft final report have been addressed.


Start Date:  December 2011               Expected End Date: June 2013

V. Project Budget

Total Lump Sum Amount (Salaries and Benefits)              $75,273.02

Cost Reimbursable Subtotal                                                   $18,000.00

Indirect Cost (subtotal x 10%)                                                    $1,800.00

Total Project Cost                                                                       $95,073.02

VI. Equipment

No equipment is anticipated nor requested for the completion of this study.

VII. Travel

No travel is expected for this project. All travel shall be in accordance with Section 112.061, Florida Statutes. FDOT employees may not travel on research contracts.

VIII. Personnel

For this project, the personnel will be the project PI, Dr. Chanyoung Lee, and Co-PI, Dr. Ed Hillsman. The project team also includes Mr. Phil Winters as a researcher and Mr. Tej Rana as an OPS research assistant. Mr. Joel Volinski who is NCTR director will be responsible for QA/QC of the project report. Ms. Krissy Larsson will provide administrative supports.

Leave a Reply

Please complete the simple math problem prior to submitting your comment. This reduces spam. Thanks! * Time limit is exhausted. Please reload CAPTCHA.

This site uses Akismet to reduce spam. Learn how your comment data is processed.