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Congestion with heterogeneous commuters

Yonghong An and Zhixiang Zhang

Economic Modelling, 2012, vol. 29, issue 3, 557-565

Abstract: We study a congestion model where a continuum of heterogeneous commuters make a binary choice between riding a bus and driving private vehicles for their commutes. Formulating the model as a large game, we establish the existence and uniqueness of a nontrivial Nash equilibrium and analyze how a gasoline tax affects the allocation of commuters between public transportation and private vehicles at the equilibrium. Based on the analysis, we provide a sufficient condition under which a gasoline tax is Pareto improving. We also prove the existence of a socially optimal policy that minimizes the aggregate loss to all commuters.

Keywords: Heterogeneous commuters; Nash equilibrium; Greenshields' model; Traffic congestion (search for similar items in EconPapers)
JEL-codes: L92 R48 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1016/j.econmod.2011.12.014

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