IDEAS home Printed from https://ideas.repec.org/p/nex/wpaper/microfoundations.html
   My bibliography  Save this paper

Micro-foundations of Congestion and Pricing: A Game Theory Perspective

Author

Listed:
  • David Levinson

    (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)

Abstract

This paper develops congestion theory and congestion pricing theory from its microfoundations, the interaction of two or more vehicles. Using game theory, with a two-player game it is shown that the emergence of congestion depends on the players-relative valuations of early arrival, late arrival, and journey delay. Congestion pricing can be used as a cooperation mechanism to minimize total costs (if returned to the players). The analysis is then extended to the case of the three-player game, which illustrates congestion as a negative externality imposed on players who do not themselves contribute to it.

Suggested Citation

  • David Levinson, 2005. "Micro-foundations of Congestion and Pricing: A Game Theory Perspective," Working Papers 200504, University of Minnesota: Nexus Research Group.
    • Handle: RePEc:nex:wpaper:microfoundations
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/11299/179927
    File Function: First version, 2007
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Levinson, 1999. "Tolling at a Frontier: A Game Theoretic Analysis," Working Papers 199904, University of Minnesota: Nexus Research Group.
    2. Arnott, R. & De Palma, A. & Lindseyt, R., 1995. "Recent Developments in the Bottleneck Model," Papers 9523, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
    3. Hildebrand, Marvin D. & Prentice, Barry E. & Lipnowski, Irwin, 1990. "Enforcement of Highway Weight Regulations: A Game Theoretic Model," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 30(2).
    4. Mohring, Herbert, 1970. "The Peak Load Problem with Increasing Returns and Pricing Constraints," American Economic Review, American Economic Association, vol. 60(4), pages 693-705, September.
    5. 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, vol. 83(1), pages 161-179, March.
    6. David Levinson, 2000. "Revenue Choice on a Serial Network," Working Papers 200001, University of Minnesota: Nexus Research Group.
    7. Kenneth Button & Erik Verhoef (ed.), 1998. "Road Pricing, Traffic Congestion and the Environment," Books, Edward Elgar Publishing, number 940.
    8. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1990. "Economics of a bottleneck," Journal of Urban Economics, Elsevier, vol. 27(1), pages 111-130, January.
    9. Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-479, June.
    10. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, December.
    11. S.C. Littlechild & G.F. Thompson, 1977. "Aircraft Landing Fees: A Game Theory Approach," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 186-204, Spring.
    12. F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 38(4), pages 582-606.
    13. C. Robin Lindsey & Erik T. Verhoef, 2000. "Traffic Congestion and Congestion Pricing," Tinbergen Institute Discussion Papers 00-101/3, Tinbergen Institute.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wuping Xin & David Levinson, 2015. "Stochastic Congestion and Pricing Model with Endogenous Departure Time Selection and Heterogeneous Travelers," Mathematical Population Studies, Taylor & Francis Journals, vol. 22(1), pages 37-52, March.
    2. Janusch, Nicholas, 2016. "A note on the distortionary effects of revenue-neutral tolls in a bottleneck congestion game," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 95-103.
    3. Berliant, Marcus, 2017. "Commuting and internet traffic congestion," MPRA Paper 77378, University Library of Munich, Germany.
    4. Xi Zou & David Levinson, 2006. "A Multi-Agent Congestion and Pricing Model," Working Papers 200605, University of Minnesota: Nexus Research Group.
    5. Shanjiang Zhu & David Levinson & Lei Zhang, 2007. "An Agent-based Route Choice Model," Working Papers 000089, University of Minnesota: Nexus Research Group.
    6. Xiao, Feng & Shen, Wei & Michael Zhang, H., 2012. "The morning commute under flat toll and tactical waiting," Transportation Research Part B: Methodological, Elsevier, vol. 46(10), pages 1346-1359.
    7. Yang, Zhisen & Yang, Zaili & Yin, Jingbo & Qu, Zhuohua, 2018. "A risk-based game model for rational inspections in port state control," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 477-495.
    8. Miller, Harvey J., 2013. "Beyond sharing: cultivating cooperative transportation systems through geographic information science," Journal of Transport Geography, Elsevier, vol. 31(C), pages 296-308.
    9. Holgun-Veras, Jos & Cetin, Mecit, 2009. "Optimal tolls for multi-class traffic: Analytical formulations and policy implications," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(4), pages 445-467, May.
    10. Holguín-Veras, José, 2011. "Urban delivery industry response to cordon pricing, time-distance pricing, and carrier-receiver policies in competitive markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(8), pages 802-824, October.
    11. Feng Xiao & Zhen Qian & H. Zhang, 2011. "The Morning Commute Problem with Coarse Toll and Nonidentical Commuters," Networks and Spatial Economics, Springer, vol. 11(2), pages 343-369, June.
    12. Holgui­n-Veras, Jose & Cetin, Mecit & Xia, Shuwen, 2006. "A comparative analysis of US toll policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(10), pages 852-871, December.
    13. Hugo E. Silva & Robin Lindsey & André de Palma & Vincent A. C. van den Berg, 2017. "On the Existence and Uniqueness of Equilibrium in the Bottleneck Model with Atomic Users," Transportation Science, INFORMS, vol. 51(3), pages 863-881, August.
    14. Yaron Hollander & Joseph Prashker, 2006. "The applicability of non-cooperative game theory in transport analysis," Transportation, Springer, vol. 33(5), pages 481-496, September.
    15. Ieromonachou, Petros & Warren, James, 2008. "Policy Packages as potential routes to urban road pricing in the UK," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 40, pages 106-123.
    16. Sutee Anantsuksomsri & Nij Tontisirin, 2016. "A spatial agent-based model of a congestion game: evolutionary game theory in space," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 57(2), pages 371-391, November.
    17. Fang Zong & Yanan He & Yixin Yuan, 2015. "Dependence of Parking Pricing on Land Use and Time of Day," Sustainability, MDPI, vol. 7(7), pages 1-21, July.
    18. Sowmya Karri & Meera M. Dhabu, 2022. "Multistage Game Model Based Dynamic Pricing for Car Parking Slot to Control Congestion," Sustainability, MDPI, vol. 14(19), pages 1-15, September.
    19. Cipriani, Ernesto & Mannini, Livia & Montemarani, Barbara & Nigro, Marialisa & Petrelli, Marco, 2019. "Congestion pricing policies: Design and assessment for the city of Rome, Italy," Transport Policy, Elsevier, vol. 80(C), pages 127-135.
    20. Otsubo, Hironori & Rapoport, Amnon, 2008. "Vickrey's model of traffic congestion discretized," Transportation Research Part B: Methodological, Elsevier, vol. 42(10), pages 873-889, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kenneth Small, 2015. "The Bottleneck Model: An Assessment and Interpretation," Working Papers 141506, University of California-Irvine, Department of Economics.
    2. Lei Zhang & David Levinson & Shanjiang Zhu, 2007. "Agent-Based Model of Price Competition and Product Differentiation on Congested Networks," Working Papers 200809, University of Minnesota: Nexus Research Group.
    3. Otsubo, Hironori & Rapoport, Amnon, 2008. "Vickrey's model of traffic congestion discretized," Transportation Research Part B: Methodological, Elsevier, vol. 42(10), pages 873-889, December.
    4. Small, Kenneth A., 2015. "The bottleneck model: An assessment and interpretation," Economics of Transportation, Elsevier, vol. 4(1), pages 110-117.
    5. Wuping Xin & David Levinson, 2015. "Stochastic Congestion and Pricing Model with Endogenous Departure Time Selection and Heterogeneous Travelers," Mathematical Population Studies, Taylor & Francis Journals, vol. 22(1), pages 37-52, March.
    6. Verhoef, Erik T., 1999. "Time, speeds, flows and densities in static models of road traffic congestion and congestion pricing," Regional Science and Urban Economics, Elsevier, vol. 29(3), pages 341-369, May.
    7. Knockaert, Jasper & Verhoef, Erik T. & Rouwendal, Jan, 2016. "Bottleneck congestion: Differentiating the coarse charge," Transportation Research Part B: Methodological, Elsevier, vol. 83(C), pages 59-73.
    8. Hugo E. Silva & Robin Lindsey & André de Palma & Vincent A. C. van den Berg, 2017. "On the Existence and Uniqueness of Equilibrium in the Bottleneck Model with Atomic Users," Transportation Science, INFORMS, vol. 51(3), pages 863-881, August.
    9. Wu, Jiyan & Tian, Ye & Sun, Jian & Michael Zhang, H. & Wang, Yunpeng, 2023. "Public or private? Optimal organization for incentive-based travel demand management," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    10. Kenneth A. Small & Xuehao Chu, 2003. "Hypercongestion," Journal of Transport Economics and Policy, University of Bath, vol. 37(3), pages 319-352, September.
    11. Button, Kenneth, 2004. "1. The Rationale For Road Pricing: Standard Theory And Latest Advances," Research in Transportation Economics, Elsevier, vol. 9(1), pages 3-25, January.
    12. Fosgerau, Mogens & Small, Kenneth A., 2013. "Hypercongestion in downtown metropolis," Journal of Urban Economics, Elsevier, vol. 76(C), pages 122-134.
    13. Ling-Ling Xiao & Hai-Jun Huang & Ronghui Liu, 2015. "Congestion Behavior and Tolls in a Bottleneck Model with Stochastic Capacity," Transportation Science, INFORMS, vol. 49(1), pages 46-65, February.
    14. Robin Lindsey, C. & van den Berg, Vincent A.C. & Verhoef, Erik T., 2012. "Step tolling with bottleneck queuing congestion," Journal of Urban Economics, Elsevier, vol. 72(1), pages 46-59.
    15. de Palma, Andre & Lindsey, Robin, 2002. "Private roads, competition, and incentives to adopt time-based congestion tolling," Journal of Urban Economics, Elsevier, vol. 52(2), pages 217-241, September.
    16. van den Berg, Vincent A.C. & Verhoef, Erik T., 2016. "Autonomous cars and dynamic bottleneck congestion: The effects on capacity, value of time and preference heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 94(C), pages 43-60.
    17. de Palma, André & Kilani, Moez & Lindsey, Robin, 2005. "Congestion pricing on a road network: A study using the dynamic equilibrium simulator METROPOLIS," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 588-611.
    18. C. Robin Lindsey & Vincent A.C. van den Berg & Erik T. Verhoef, 2010. "Step by Step: Revisiting Step Tolling in the Bottleneck Model," Tinbergen Institute Discussion Papers 10-118/3, Tinbergen Institute, revised 02 Aug 2012.
    19. Li, Zhi-Chun & Huang, Hai-Jun & Yang, Hai, 2020. "Fifty years of the bottleneck model: A bibliometric review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 139(C), pages 311-342.
    20. Sun, Jian & Wu, Jiyan & Xiao, Feng & Tian, Ye & Xu, Xiangdong, 2020. "Managing bottleneck congestion with incentives," Transportation Research Part B: Methodological, Elsevier, vol. 134(C), pages 143-166.

    More about this item

    Keywords

    Game Theory; Congestion; Queueing; Traffic Flow; Congestion Pricing; Road Pricing; Value Pricing .;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • D10 - Microeconomics - - Household Behavior - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nex:wpaper:microfoundations. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Levinson (email available below). General contact details of provider: https://edirc.repec.org/data/nexmnus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.