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Modal choice and optimal congestion


  • Quentin David

    () (CREA, University of Luxembourg)

  • Renaud Foucart

    () (ECARES, Université libre de Bruxelles)


We study the choice of transportation modes within a city where commuters have het- erogeneous preferences for a car. As in standard models of externalities, the market outcome never maximizes aggregate welfare. We show that in the presence of multiple equilibria prob- lems of coordination can worsen this result. Hence, a social planner focusing on the marginal impact of policies may miss the largest source of inefficiency. We discuss two policy tools: taxation and traffic separation (e.g. exclusive lanes for public transportation). Setting the optimal levels of taxation and of traffic separation constitutes a necessary but not a sufficient condition to reach the first best equilibrium. Comparing the relative efficiency of both poli- cies, we show that traffic separation should be preferred for large-scale policies while taxation better applies to marginal modifications of commuting patterns.

Suggested Citation

  • Quentin David & Renaud Foucart, 2012. "Modal choice and optimal congestion," CREA Discussion Paper Series 12-03, Center for Research in Economic Analysis, University of Luxembourg.
  • Handle: RePEc:luc:wpaper:12-03

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    Cited by:

    1. David, Quentin & Foucart, Renaud, 2014. "Modal choice and optimal congestion," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 12-20.
    2. Simone Borghesi & Chiara Calastri & Giorgio Fagiolo, 2014. "How do people choose their commuting mode? An evolutionary approach to transport choices," LEM Papers Series 2014/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

    More about this item


    Modal choice; Coordination; Network effect; Cross-modal congestion;

    JEL classification:

    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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