Modal choice and optimal congestion

Quentin David and Renaud Foucart

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: 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.

Keywords: Modal choice; Coordination; Network effect; Cross-modal congestion (search for similar items in EconPapers)
JEL-codes: H2 L5 R4 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-geo, nep-net, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Modal choice and optimal congestion (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:12-03

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