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Financial tools for the abatement of traffic congestion: a dynamical analysis

Angelo Antoci, Marcello Galeotti () and Davide Radi ()
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Marcello Galeotti: Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze

No 2011-01, Working Papers - Mathematical Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: In this article we propose a simple mechanism aimed at implementing and supporting environmental protection policies in urban areas based on innovative financial instruments issued by a policy maker, which can be bought by two categories of involved agents, city users and agencies providing the city services. According to this mechanism, virtuous service providers choosing to offer high quality services can obtain cost abatement. City users, recip- rocally, have to pay for entering into the city, but can protect themselves against a city low quality of life by a self-insurance device. The interaction of these two categories of economic agents is modelled by a two-population evolutionary game, where the population of city users strategically interacts with that of service providers. From the analysis of the model it emerges that such a dynamics may lead to a welfare- improving attracting Nash equilibrium at which all city users choose to use environmental-friendly means of transportation and all service providers choose to offer high quality services. However, the basin of attraction of that equilibrium may have a rather complex morphology. In particular more attractors and/or limit cycles can be present. In such a context we indicate sufficient conditions making the virtuous equilibrium a global attractor for all trajectories starting at a mixed-strategy point.

Pages: 20 pages
Date: 2011-01
New Economics Papers: this item is included in nep-env and nep-ure
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Journal Article: Financial Tools for the Abatement of Traffic Congestion: A Dynamical Analysis (2011) Downloads
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