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Individual tradable permit market and traffic congestion: An experimental study

  • Ch'ng, Kean Siang

This paper investigates the potential of an individual tradable permit system in an experimental two-sided repeated double auction market to overcome over-consumption through road demand management. The evaluation of this system shows that traders exhibit strong dependence on reservation price and there are significant transfers of permit from low value users to high value users. During peak hours, the permit price increases owing to high demand, so the cost of using the road is high during congestion. This creates incentive for low value drivers to postpone their trips and resell permits in the peak hours to gain profit. The results show the delayer pays principle, in which drivers who value highly have to pay drivers who are willing to stay off the road during peak hours.

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File URL: http://mpra.ub.uni-muenchen.de/26638/1/MPRA_paper_26638.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26638.

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Date of creation: 16 Oct 2010
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Handle: RePEc:pra:mprapa:26638
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  1. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 111.
  2. Daniel J. Graham & Stephen Glaister, 2002. "The Demand for Automobile Fuel: A Survey of Elasticities," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 36(1), pages 1-25, January.
  3. Koh, Winston T. H. & Lee, David K. C., 1994. "The vehicle quota system in Singapore: An assessment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 28(1), pages 31-47, January.
  4. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  5. David Levinson & Peter Rafferty, 2004. "Delayer Pays Principle: Examining Congestion Pricing with Compensation," Working Papers 200407, University of Minnesota: Nexus Research Group.
  6. E Verhoef & P Nijkamp & P Rietveld, 1997. "Tradeable permits: their potential in the regulation of road transport externalities," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 24(4), pages 527-548, July.
  7. Daniel Friedman, 1982. "Price Formation in Double Auction Markets," UCLA Economics Working Papers 278, UCLA Department of Economics.
  8. Raux, Charles & Marlot, Grégoire, 2005. "A system of tradable CO2 permits applied to fuel consumption by motorists," Transport Policy, Elsevier, vol. 12(3), pages 255-265, May.
  9. Charles Raux & Grégoire Marlot, 2005. "A System of Tradable CO2 Permits Applied to Fuel Consumption by Motorists," Post-Print halshs-00067833, HAL.
  10. Wadud, Zia, 2011. "Personal tradable carbon permits for road transport: Why, why not and who wins?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(10), pages 1052-1065.
  11. Friedman, Daniel, 1984. "On the Efficiency of Experimental Double Auction Markets," American Economic Review, American Economic Association, vol. 74(1), pages 60-72, March.
  12. Richard Arnott & Andre de Palma & Robin Lindsey, 1993. "The Welfare Effects Of Congestion Tolls With Heterogeneous Commuters," Boston College Working Papers in Economics 231, Boston College Department of Economics.
  13. M. L. Weitzman, 1973. "Prices vs. Quantities," Working papers 106, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Charles Raux, 2004. "The Use of Transferable Permits in Transport Policy," Post-Print halshs-00067895, HAL.
  15. repec:dgr:vuarem:1997-31 is not listed on IDEAS
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