Against all Odds: Nash Equilibria in a Road Pricing Experiment
Congested roads during rush-hours create a common-pool problem in which individual rationality results in inefficienCcies. They are not a mere nuisance for commuters but impose social costs that can be reduced by implementing a system of user fees: road p
- PDF / 2,203,685 Bytes
- 21 Pages / 439.37 x 666.142 pts Page_size
- 25 Downloads / 198 Views
stract. Congested roads during rush-hours create a common-pool problem in which individual rationality results in inefficiencies. They are not a mere nuisance for commuters but impose social costs that can be reduced by implementing a system of user fees: road pricing. Road pricing promises substantial efficiency gains if used as an instrument to achieve an efficient allocation offixed road capacity. The road-pricing model of Amott, R., De Palma, A., and Lindsey (\993) is tested in an experiment. Although the Nash equilibrium of the model is not unique and Nash behavior is therefore unlikely, the road-pricing experiment supports the predictions of the model as long as each player plays with one vehic\e only. Allowing players to play with more than one vehicle makes the outcome more efficient. Players appear to intemalize part ofthe extemality.
1
Introduction
Economists agree that prices are an excellent medium for providing inforrnation and guiding agents' behavior. This implies that taxes or fees can be used to effectively influence economic activity. In particular in the presence of externalities or public goods, where the market mechanism fails to achieve an efficient outcome, price instruments prove to be effective at internalizing external costs. One prominent example of an external effect is traffic congestion. Although there is no obvious reason why public authorities should refrain from using road pricing to regulate traffic, we rarely observe that they do. Except for very few examples, the fixed capacity of roads is allocated through a decentralized decision process. Because the situation on the roads appears to lack efficiency, it seems that it could be easily improved upon by implementing an appropriate system of user fees. And in fact, there is a vivid discussion about road pricing. This study contributes to the debate by providing results obtained from two road-pricing experiments. The various externalities created by traffic are well known: emissions, the destruction of nature, and noise, to mention just a few. Hence the regulation of traffic, in order to reduce extemalities that harrn the environment to their efficient levels, is on the politic al agenda in many industrialized countries. In this context, M. Schreckenberg et al. (eds.), Human Behaviour and Traffic Networks © Springer-Verlag Berlin Heidelberg 2004
134
Kerstin Schneider and Joachim Weimann
road pricing is sometimes recommended as a remedy for environmental problems caused by traffic. However, road pricing is not primarily targeted at solving environmental problems. Policy instruments like energy taxes are better suited for reduc ing activities that lead to a degradation of the environment. Therefore, we want to emphasize that road pricing aims at reduc ing time coordination costs resulting from road congestion. The problem at stake is the allocation of the fixed capacity of roads. Public intervention in the decentralized decision process is aimed at minimizing the social opportunity costs of travelling. Congested roads are a repeat
Data Loading...
