Introducing Autonomous Vehicles: Adoption Patterns and Impacts on Social Welfare

Opher Baron (), Oded Berman () and Mehdi Nourinejad ()
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Opher Baron: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada
Oded Berman: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada
Mehdi Nourinejad: Department of Civil Engineering, York University, North York, Ontario M3J 2S5, Canada

Manufacturing & Service Operations Management, 2022, vol. 24, issue 1, 352-369

Abstract: Problem definition : Autonomous vehicles (AVs) are predicted to enter the consumer market in less than a decade. There is currently no consensus on whether their presence will have a positive impact on users and society. The skeptics of automation foresee increased congestion, whereas the advocates envision smoother traffic with shorter travel times. We study the automation controversy and advise policymakers on how and when to promote AVs. Academic/practical relevance : The AV technology is advancing rapidly and there is a need to study its impact on social welfare and the likelihood of its adoption by the public. Methodology : We use supply-demand theory to find the equilibrium number of trips for autonomous and regular households. We develop a simulation model of peer-to-peer AV sharing. We compare the socially optimal level of automation with the selfish adoption patterns where households independently choose their vehicle type. Results : We establish that the optimal social welfare is influenced by: (i) the network connectivity, that is, the ability of the infrastructure to serve AVs, (ii) the additional comfort provided by AVs that allows passengers to engage in other productive activities instead of driving, and (iii) the AV sharing patterns that reduce ownership costs, but create empty vehicle trips that increase congestion. Managerial implications : We investigate the impact of AVs in a case study of Toronto and show that partial automation maximizes social welfare. We show that the comfort of AVs may add traffic that compromises social welfare. Moreover, although traffic increases with automation, travel times may decrease because of significant improvements in traffic flow caused by AV connectivity in the network.

Keywords: transportation; public policy; capacity planning; investment (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:24:y:2022:i:1:p:352-369

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