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A note on the distortionary effects of revenue-neutral tolls in a bottleneck congestion game

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  • Janusch, Nicholas

Abstract

This note demonstrates how the redistribution of revenue from a Pigouvian policy can distort incentives and handicap the social objectives of the policy by creating a moral hazard problem. Based on the Levinson (2005) game theory model, I develop a three-player bottleneck congestion game that emulates a repeated prisoner’s dilemma and derive efficient tolls. This conceptual game demonstrates the distortionary effects from a revenue-neutral toll policy with lump-sum revenue redistribution and the equity-efficiency tradeoff.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:transa:v:92:y:2016:i:c:p:95-103
    DOI: 10.1016/j.tra.2016.07.007
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    References listed on IDEAS

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    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. Levinson, David, 2005. "Micro-foundations of congestion and pricing: A game theory perspective," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 691-704.
    3. David Levinson & Peter Rafferty, 2004. "Delayer Pays Principle: Examining Congestion Pricing with Compensation," Working Papers 200407, University of Minnesota: Nexus Research Group.
    4. Xi Zou & David Levinson, 2006. "A Multi-Agent Congestion and Pricing Model," Working Papers 200605, University of Minnesota: Nexus Research Group.
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    6. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1990. "Economics of a bottleneck," Journal of Urban Economics, Elsevier, vol. 27(1), pages 111-130, January.
    7. Hau, Timothy D., 1992. "Economic fundamentals of road pricing : a diagrammatic analysis," Policy Research Working Paper Series 1070, The World Bank.
    8. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-260, May.
    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. Alex Anas & Robin Lindsey, 2011. "Reducing Urban Road Transportation Externalities: Road Pricing in Theory and in Practice," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 66-88, Winter.
    11. Yaron Hollander & Joseph Prashker, 2006. "The applicability of non-cooperative game theory in transport analysis," Transportation, Springer, vol. 33(5), pages 481-496, September.
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    More about this item

    Keywords

    Game theory; Congestion; Pricing; Revenue recycling; Acceptability;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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