Income distribution, implementation sequence, and equity in auto ownership rationing

Auto ownership rationing schemes, including lottery, auction and hybrid schemes, have been recognized as effective measures to mitigate urban traffic congestion. The implementation sequence of auction and lottery in the hybrid schemes has two possible scenarios: auction is implemented before lottery (i.e., A+L), and lottery is implemented before auction (i.e., L+A). This paper addresses the issues of income distribution, implementation sequence, and equity in the auto ownership rationing schemes. Expected social surplus maximization models are proposed for determining the optimal auto quota for each scheme and the optimal proportion allocated to the lottery and auction for the hybrid schemes. In the proposed models, a trade-off between positive externality (social contribution) and negative externality (traffic congestion) caused by auto industrial development is considered, together with effects of residents’ income distribution. Inequity issue incurred by the rationing schemes (who gains and who loses) is investigated, and Pareto-improvement strategy with self-financing constraint is presented to balance the equity and efficiency. The solution properties of the proposed models are analytically explored, and the solutions of different schemes are compared. The results show that (i) residents’ income distribution has no significant effects on the properties of the models; (ii) the optimal L+A hybrid scheme outperforms the optimal A+L hybrid scheme in terms of the expected social surplus; (iii) however, it is just reverse for the Pareto-improvement strategy that solves the inequity issue, i.e., the optimal A+L Pareto-improvement strategy is better than the optimal L+A Pareto-improvement strategy in terms of the expected social surplus.