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TRAFFIC CONGESTION CONTROL: TRADABLE PERMITS vs ROAD TOLLS

Author

Listed:
  • Pouya Rezaeinia
  • André de Palma
  • Robin Lindsey

    (Université de Cergy-Pontoise, THEMA)

Abstract

Tradable permits (TP) have been proposed as a tool for controlling road traffic congestion. Unlike with tolls, travelers in aggregate do not incur net out-of-pocket costs if permits are distributed free. Moreover, if travel conditions do not change, a TP scheme can be designed to support the same traffic flows as tolls. However, the two instruments are no longer equivalent if conditions fluctuate, and neither permit quantities nor toll levels can be adjusted accordingly. In this paper, we compare the economic efficiency of TP and tolls during a morning peak travel period on a stylized urban road network. Road link capacities are susceptible to temporary reductions due to incidents, bad weather, road repairs or other shocks. We apply the dynamic traffic network simulator METROPOLIS in which travelers make mode, departure time and route choice decisions. Permit quantities and tolls are chosen to control the number of vehicle trips into the city centre with the goal of maximizing welfare defined by expected social surplus. We find that tolls outperform TP if road capacities are perfectly correlated (e.g., due to bad weather), whereas TP outperform tolls if capacity fluctuations are independent (e.g., due to crashes).

Suggested Citation

  • Pouya Rezaeinia & André de Palma & Robin Lindsey, 2021. "TRAFFIC CONGESTION CONTROL: TRADABLE PERMITS vs ROAD TOLLS," Thema Working Papers 2021-09, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.
    • Handle: RePEc:ema:worpap:2021-09
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    References listed on IDEAS

    as
    1. Martin L. Weitzman, 1974. "Prices vs. Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 477-491.
    2. André de Palma & Shaghayegh Vosough & Robin Lindsey, 2020. "Pricing vehicle emissions and congestion using a dynamic traffic network simulator," Thema Working Papers 2020-09, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.
    3. de Palma, André & Proost, Stef & Seshadri, Ravi & Ben-Akiva, Moshe, 2018. "Congestion tolling - dollars versus tokens: A comparative analysis," Transportation Research Part B: Methodological, Elsevier, vol. 108(C), pages 261-280.
    4. 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.
    5. de Palma, André & Lindsey, Robin, 2020. "Tradable permit schemes for congestible facilities with uncertain supply and demand," Economics of Transportation, Elsevier, vol. 21(C).
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    Cited by:

    1. Ravi Seshadri & André de Palma & Moshe Ben-Akiva, 2021. "Congestion Tolling−Dollars versus Tokens: Within-day Dynamics," Thema Working Papers 2021-12, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.

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    Keywords

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    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • 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

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