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Financial Tools for the Abatement of Traffic Congestion: A Dynamical Analysis

  • Angelo Antoci
  • Marcello Galeotti
  • Davide Radi

    ()

In this article we propose a simple mechanism aimed at implementing and supporting environmental protection policies in urban areas based on innovative financial instruments issued by a policy maker, which can be bought by two categories of involved agents, city users and agencies providing the city services. According to this mechanism, virtuous service providers choosing to offer high quality services can obtain cost abatement. City users, recip- rocally, have to pay for entering into the city, but can protect themselves against a city low quality of life by a self-insurance device. The interaction of these two categories of economic agents is modelled by a two-population evolutionary game, where the population of city users strategically interacts with that of service providers. From the analysis of the model it emerges that such a dynamics may lead to a welfare- improving attracting Nash equilibrium at which all city users choose to use environmental-friendly means of transportation and all service providers choose to offer high quality services. However, the basin of attraction of that equilibrium may have a rather complex morphology. In particular more attractors and/or limit cycles can be present. In such a context we indicate sufficient conditions making the virtuous equilibrium a global attractor for all trajectories starting at a mixed-strategy point.

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File URL: http://hdl.handle.net/10.1007/s10614-011-9294-7
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Article provided by Society for Computational Economics in its journal Computational Economics.

Volume (Year): 38 (2011)
Issue (Month): 3 (October)
Pages: 389-405

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Handle: RePEc:kap:compec:v:38:y:2011:i:3:p:389-405
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  1. Simone Borghesi & Angelo Antoci & Marcello Galeotti, 2009. "Environmental Options and Technological Innovation: An Evolutionary Game Model," Working Papers 2009.90, Fondazione Eni Enrico Mattei.
  2. Costanza, Robert & Perrings, Charles, 1990. "A flexible assurance bonding system for improved environmental management," Ecological Economics, Elsevier, vol. 2(1), pages 57-75, April.
  3. Antoci, Angelo & Galeotti, Marcello & Geronazzo, Lucio, 2007. "Visitor and firm taxes versus environmental options in a dynamical context," MPRA Paper 13667, University Library of Munich, Germany.
  4. Perrings, Charles, 1989. "Environmental bonds and environmental research in innovative activities," Ecological Economics, Elsevier, vol. 1(1), pages 95-110, February.
  5. Luigi Bonatti & Emanuele Campiglio, 2009. "Mobility Systems and Economic Growth: a Theoretical Analysis of the Long-Term Effects of Alternative Transportation Policies," Department of Economics Working Papers 0907, Department of Economics, University of Trento, Italia.
  6. Angelo Antoci & Marcello Galeotti & Davide Radi, 2011. "Financial tools for the abatement of traffic congestion: a dynamical analysis," Working Papers - Mathematical Economics 2011-01, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  7. Gwilliam, Ken, 2008. "A review of issues in transit economics," Research in Transportation Economics, Elsevier, vol. 23(1), pages 4-22, January.
  8. Gian Italo Bischi & Davide Radi, 2011. "An extension of the Antoci-Dei-Galeotti evolutionary model for environment protection through financial instruments," Working Papers 1105, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
  9. Antoci, Angelo & Sodini, Mauro, 2009. "Indeterminacy, bifurcations and chaos in an overlapping generations model with negative environmental externalities," MPRA Paper 13750, University Library of Munich, Germany.
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