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A Structural Model of Traffic Congestion


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  • Erik T. Verhoef

    (Vrije Universiteit Amsterdam)

  • Jan Rouwendal

    (Vrije Universiteit Amsterdam)


Conventional economic models of traffic congestion assume that therelation between road use and speed is a technical one. In this paper wederive the speed-flow relationship from more fundamental considerationsconcerning driving behaviour. We develop a structural model in which driverschoose their own optimal speed, by trading off various cost aspects of making atrip: time costs, expected accident costs and fuel costs. Since the optimalspeed depends on the presence of other drivers on the road, we can derive a speed flow relationship on the basis of this behaviour. It is demonstrated thatthe relationship between the various cost components should be taken intoaccount in computing the external costs of traffic. For tolls alone, it isdemonstrated that a regulator ignoring the fundamental relation willotherwise fail to set optimal tolls, and will underestimate the efficiencygains of congestion pricing. Moreover, the overall welfare optimum in ourmodel is found to be off the speed-flow function, and off the average andmarginal cost functions derived from it in the conventional approach. This fulloptimum requires tolls to be either accompanied by speed policies, or to beset as a function of speed. Using an empirically calibrated numericalsimulation model, we illustrate these qualitative findings, and attempt to assess their potential empirical relevance.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-026/3.

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Date of creation: 05 Mar 2001
Date of revision: 17 Oct 2003
Handle: RePEc:dgr:uvatin:20010026

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  1. Rotemberg, Julio J., 1985. "The efficiency of equilibrium traffic flows," Journal of Public Economics, Elsevier, Elsevier, vol. 26(2), pages 191-205, March.
  2. Small, K.A. & Gomez-Ibanez, J.A., 1996. "Urban Transportation," Papers, California Irvine - School of Social Sciences 95-96-4, California Irvine - School of Social Sciences.
  3. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, American Economic Association, vol. 59(2), pages 251-60, May.
  4. Small, Kenneth A. & Gomez-Ilbanez, Jose A., 1998. "Road Pricing for Congestion Management: The Transition from Theory to Policy," University of California Transportation Center, Working Papers qt8kk909p1, University of California Transportation Center.
  5. C. Robin Lindsey & Erik T. Verhoef, 2000. "Traffic Congestion and Congestion Pricing," Tinbergen Institute Discussion Papers, Tinbergen Institute 00-101/3, Tinbergen Institute.
  6. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 161-79, March.
  7. Patrick McCarthy, 2001. "Effect of speed limits on speed distributions and highway safety: A survey of recent literature," Transport Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(1), pages 31-50, January.
  8. Richard Arnott & Andre de Palma & Robin Lindsey, 1995. "Recent Developments in the Bottleneck Model," Boston College Working Papers in Economics, Boston College Department of Economics 305., Boston College Department of Economics.
  9. Andrew Dickerson & John Peirson & Roger Vickerman, 1998. "Road Accidents and Traffic Flows: An Econometric Investigation," Studies in Economics, Department of Economics, University of Kent 9809, Department of Economics, University of Kent.
  10. Verhoef, Erik T., 2001. "An Integrated Dynamic Model of Road Traffic Congestion Based on Simple Car-Following Theory: Exploring Hypercongestion," Journal of Urban Economics, Elsevier, vol. 49(3), pages 505-542, May.
  11. Erik Teodoor Verhoef, 1998. "Time, speeds, flows and densities in static models of road traffic congestion and congestion pricing," ERSA conference papers ersa98p156, European Regional Science Association.
  12. Daganzo, C. F. & Cassidy, M. J. & Bertini, R. L., 1999. "Possible explanations of phase transitions in highway traffic," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 33(5), pages 365-379, June.
  13. C. Robin Lindsey & Erik T. Verhoef, 2000. "Traffic Congestion and Congestion Pricing," Tinbergen Institute Discussion Papers, Tinbergen Institute 00-101/3, Tinbergen Institute.
  14. Boardman, Anthony E. & Lave, Lester B., 1977. "Highway congestion and congestion tolls," Journal of Urban Economics, Elsevier, vol. 4(3), pages 340-359, July.
  15. Keeler, Theodore E & Small, Kenneth A, 1977. "Optimal Peak-Load Pricing, Investment, and Service Levels on Urban Expressways," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(1), pages 1-25, February.
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Cited by:
  1. van Ommeren, Jos & Fosgerau, Mogens, 2008. "Workers' marginal costs of commuting," MPRA Paper 12010, University Library of Munich, Germany.


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