Congestion Pricing: A Mechanism Design Approach

C.-Philipp Heller, Johannes Johnen and Sebastian Schmitz

Journal of Transport Economics and Policy, 2019, vol. 53, issue 1, 74--98

Abstract: We study traffic congestion as a mechanism design problem by analysing the allocation of drivers to a congestible road. Drivers have private information about their value of time (VOT). With a finite number of drivers, the efficient allocation depends on drivers’ VOT and is ex-ante unknown. Thus, setting a single Pigouvian price is generally not optimal. Nevertheless, the regulator can implement the efficient allocation with a Vickrey-Clarke-Groves payment rule: drivers pay for road access but also for faster travel. Our mechanism sets this price correctly without prior knowledge of the distribution of drivers’ VOT.

Date: 2019
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https://www.jstor.org/stable/90026261

Related works:
Working Paper: Congestion pricing. A mechanism design approach (2019)
Working Paper: Congestion Pricing: A Mechanism Design Approach
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Persistent link: https://EconPapers.repec.org/RePEc:tpe:jtecpo:2019:53:1:74--98

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