Simultaneously consideration subsidy allocation and target setting in low-volume offshore ferry routes: an empirical study of Taiwan companies

To satisfy the need for resident transportation between offshore islands and a mainland, and among offshore islands, some ferry firms are asked to run low-volume routes. Since low-volume routes often bring losses to operators, the government may provide compensation to those offshore ferry routes. However, the current subsidy methods may result in operating inefficiency. Also, the previous studies lack a mechanism for auditing the performance of these ferry routes while considering subsidies. In order to solve these problems and consider the operational characteristics of ferry routes and the fairness of input and output multipliers, this study proposes a different performance-based mechanism built by a cross-efficiency two-stage network data envelopment analysis to allocate subsidies and set targets for individual offshore ferry routes. By setting targets, the government can supervise subsidy usage. An empirical example of seven offshore ferry routes in Taiwan is illustrated. The different results of allocation between stages can be found for all routes and the individual intermediate product and final output targets can be set for all routes. The results provide constructive suggestions for the policymaker on how to allocate subsidies and set targets among offshore ferry routes.