Individual tradable permit market and traffic congestion: An experimental study

Ch'ng Kean Siang

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the potential of an individual tradable permit system in an experimental two-sided repeated double auction market to overcome over-consumption through road demand management. The evaluation of this system shows that traders exhibit strong dependence on reservation price and there are significant transfers of permit from low value users to high value users. During peak hours, the permit price increases owing to high demand, so the cost of using the road is high during congestion. This creates incentive for low value drivers to postpone their trips and resell permits in the peak hours to gain profit. The results show the delayer pays principle, in which drivers who value highly have to pay drivers who are willing to stay off the road during peak hours.

Keywords: : Individual tradable permit; Congestion; High value and low value drivers; Allocative efficiency (search for similar items in EconPapers)
JEL-codes: C91 D61 R41 (search for similar items in EconPapers)
Date: 2010-10-16
New Economics Papers: this item is included in nep-ure
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