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“Cap and Trade” for Congestion Control

Author

Listed:
  • Alfredo Garcia

    ()

  • Mingyi Hong

    ()

  • Jorge Barrera

    ()

Abstract

We study a “cap and trade” scheme for congestion control: the planner sets constraints for aggregate utilization on certain critical links in a given network and competitive trading of usage rights in a secondary market is expected to identify over time prices clearing demand for the utilization of the constrained links. If prices in a “cap and trade” scheme stabilize relatively quickly, a social planner can fine-tune the caps for aggregate utilization on critical links. However, it is not clear that prices would necessarily stabilize as users dynamically adjust their route and/or flow choices. In this paper we show that prices and flows (or routes) do stabilize in a “cap and trade” scheme for congestion control when users are assumed to adjust their flow (or route) choices by optimizing vis-à-vis current conditions. A sufficient condition for this result pertains to the relative speed of trading versus users’ adjustments. We find that prices stabilize and flows (or routes) converge to an equilibrium if the pace at which prices are updated is faster than that at which users adjust their decisions. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Alfredo Garcia & Mingyi Hong & Jorge Barrera, 2012. "“Cap and Trade” for Congestion Control," Dynamic Games and Applications, Springer, vol. 2(3), pages 280-293, September.
  • Handle: RePEc:spr:dyngam:v:2:y:2012:i:3:p:280-293
    DOI: 10.1007/s13235-012-0049-4
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    References listed on IDEAS

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    6. William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 885-915.
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    8. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-260, May.
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    Cited by:

    1. repec:eee:transb:v:104:y:2017:i:c:p:1-16 is not listed on IDEAS
    2. Wang, Hua & Zhang, Xiaoning, 2016. "Joint implementation of tradable credit and road pricing in public-private partnership networks considering mixed equilibrium behaviors," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 94(C), pages 158-170.
    3. He, Fang & Yin, Yafeng & Shirmohammadi, Nima & Nie, Yu (Marco), 2013. "Tradable credit schemes on networks with mixed equilibrium behaviors," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 47-65.

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