The use of mechanism design in the regulation of congestion.

Author(s)
Kveiborg, O.
Year
Abstract

Since Pigou it has been known that tax levels equal to marginal external costs give the most efficient social outcome. However, to be able to use these results the social planner has to know the value of the congestion costs in order to determine the size of the Pigou tax. Newer economic theory suggests that it may not be necessary to calculate the value of the external costs. The theory concerns the implementation of socially desired outcomes (e.g. the most efficient level of transport in a road network). In relation to internalisation of externalities, and also in relation to congestion, the Compensation Mechanism implements the outcome reached using Pigou taxes in an economy with externalities - that is, the economic efficient outcome. The mechanism implements this result by having each individual announce the amount (of money) he will pay in compensation for the delay he causes, and the amount he should receive in order to compensate him for the delays generated by other commuters. The practical uses of mechanisms have been few, and no examples in transport settings have been seen. This paper demonstrates the important elements of the Compensation Mechanism and discusses some of the problems this new methodology raises. For the covering abstract see ITRD E128239.

Request publication

4 + 1 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.

Publication

Library number
C 35566 (In: C 35524 [electronic version only]) /72 /73 / ITRD E128281
Source

In: Urban transport VIII : urban transport and the environment in the 21st century : proceedings of the Eighth International Conference on Urban Transport and The Environment in the 21st Century, Seville, Spain, 13-15 March 2002, p. 429-438, 12 ref.

Our collection

This publication is one of our other publications, and part of our extensive collection of road safety literature, that also includes the SWOV publications.