Modal choice and optimal congestion
AbstractWe study the choice of transportation modes within a city where commuters have het- erogeneous preferences for a car. As in standard models of externalities, the market outcome never maximizes aggregate welfare. We show that in the presence of multiple equilibria prob- lems of coordination can worsen this result. Hence, a social planner focusing on the marginal impact of policies may miss the largest source of inefficiency. We discuss two policy tools: taxation and traffic separation (e.g. exclusive lanes for public transportation). Setting the optimal levels of taxation and of traffic separation constitutes a necessary but not a sufficient condition to reach the first best equilibrium. Comparing the relative efficiency of both poli- cies, we show that traffic separation should be preferred for large-scale policies while taxation better applies to marginal modifications of commuting patterns.
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Bibliographic InfoPaper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 12-03.
Date of creation: 2012
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Modal choice; Coordination; Network effect; Cross-modal congestion;
Find related papers by JEL classification:
- R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
- L5 - Industrial Organization - - Regulation and Industrial Policy
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-08 (All new papers)
- NEP-GEO-2012-07-08 (Economic Geography)
- NEP-NET-2012-07-08 (Network Economics)
- NEP-TRE-2012-07-08 (Transport Economics)
- NEP-URE-2012-07-08 (Urban & Real Estate Economics)
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