“Cap and Trade” for Congestion Control
AbstractWe study a “cap and trade” scheme for congestion control: the planner sets constraints for aggregate utilization on certain critical links in a given network and competitive trading of usage rights in a secondary market is expected to identify over time prices clearing demand for the utilization of the constrained links. If prices in a “cap and trade” scheme stabilize relatively quickly, a social planner can fine-tune the caps for aggregate utilization on critical links. However, it is not clear that prices would necessarily stabilize as users dynamically adjust their route and/or flow choices. In this paper we show that prices and flows (or routes) do stabilize in a “cap and trade” scheme for congestion control when users are assumed to adjust their flow (or route) choices by optimizing vis-à-vis current conditions. A sufficient condition for this result pertains to the relative speed of trading versus users’ adjustments. We find that prices stabilize and flows (or routes) converge to an equilibrium if the pace at which prices are updated is faster than that at which users adjust their decisions. Copyright Springer Science+Business Media, LLC 2012
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal Dynamic Games and Applications.
Volume (Year): 2 (2012)
Issue (Month): 3 (September)
Contact details of provider:
Web page: http://www.springer.com/economics/journal/13235
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
- Larsson, Torbjörn & Patriksson, Michael, 1995. "An augmented lagrangean dual algorithm for link capacity side constrained traffic assignment problems," Transportation Research Part B: Methodological, Elsevier, vol. 29(6), pages 433-455, December.
- William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 885-915.
- M. L. Weitzman, 1973.
"Prices vs. Quantities,"
106, Massachusetts Institute of Technology (MIT), Department of Economics.
- Saari, Donald G, 1985. "Iterative Price Mechanisms," Econometrica, Econometric Society, vol. 53(5), pages 1117-31, September.
- Cominetti, Roberto & Melo, Emerson & Sorin, Sylvain, 2010. "A payoff-based learning procedure and its application to traffic games," Games and Economic Behavior, Elsevier, vol. 70(1), pages 71-83, September.
- William H. Sandholm, 2002. "Evolutionary Implementation and Congestion Pricing," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 667-689.
- Bala, Venkatesh & Majumdar, Mukul, 1992. "Chaotic Tatonnement," Economic Theory, Springer, vol. 2(4), pages 437-45, October.
- Sandholm, William H, 2002. "Evolutionary Implementation and Congestion Pricing," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 667-89, July.
- Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
- He, Fang & Yin, Yafeng & Shirmohammadi, Nima & Nie, Yu (Marco), 2013. "Tradable credit schemes on networks with mixed equilibrium behaviors," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 47-65.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.