TRAFFIC CONGESTION CONTROL: TRADABLE PERMITS vs ROAD TOLLS

Pouya Rezaeinia, André de Palma () and Charles Lindsey ()

No 2021-09, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: Tradable permits (TP) have been proposed as a tool for controlling road traffic congestion. Unlike with tolls, travelers in aggregate do not incur net out-of-pocket costs if permits are distributed free. Moreover, if travel conditions do not change, a TP scheme can be designed to support the same traffic flows as tolls. However, the two instruments are no longer equivalent if conditions fluctuate, and neither permit quantities nor toll levels can be adjusted accordingly. In this paper, we compare the economic efficiency of TP and tolls during a morning peak travel period on a stylized urban road network. Road link capacities are susceptible to temporary reductions due to incidents, bad weather, road repairs or other shocks. We apply the dynamic traffic network simulator METROPOLIS in which travelers make mode, departure time and route choice decisions. Permit quantities and tolls are chosen to control the number of vehicle trips into the city centre with the goal of maximizing welfare defined by expected social surplus. We find that tolls outperform TP if road capacities are perfectly correlated (e.g., due to bad weather), whereas TP outperform tolls if capacity fluctuations are independent (e.g., due to crashes).

Keywords: Congestion tolls; permits, departure time, uncertainly, network, second-best (search for similar items in EconPapers)
JEL-codes: D62 R41 R48 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-env, nep-tre and nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2021-09

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