Pareto-improving social optimal pricing schemes based on bottleneck permits for managing congestion at a merging section

Abstract

Akamatsu, Sato, and Nguyen (2006 Akamatsu, T., Sato, S., & Nguyen, X. L. (2006). Tradable time-of-day bottleneck permits for morning commuters (in Japanese). JSCE Journal of Infrastructure Planning 62(4), 605–620.[Crossref] , [Google Scholar]) proposed a first-best pricing scheme based on the concept of bottleneck permits. The scheme allows permit holders to pass a bottleneck at specified times and is shown to be able to minimize social cost. However, the scheme is not always Pareto-improving in that it may harm some drivers. The objective of this study is to design Pareto-improving pricing scheme with bottleneck permits for a V-shaped two-to-one merge bottleneck. First, the paper formulates the morning commute model in the network and describes the arrival time choice equilibrium in the network with merging bottleneck. Secondly, we show that the first-best pricing scheme with bottleneck permits for this V-shaped network does not always achieve a Pareto improvement, with the cost of one group of drivers is increased by the permit pricing, a phenomena akin to the bottleneck paradox of Arnott, de Palma, and Lindsey (1993 Arnott, R., de Palma, A., & Lindsey, R. (1993). Properties of dynamic traffic equilibrium involving bottlenecks, including a paradox and metering. Transportation Science 27(2), 148–160.[Crossref], [Web of Science ®] , [Google Scholar]). We propose three implementations of bottleneck permits for Pareto-improving: (1) merging priority rule is included in the bottleneck permits scheme by creating different market for each origin; (2) the permit revenues are refunded as monetary compensation to drivers whose cost is increased; and (3) the permit revenues are used to expand bottleneck capacity. For each implementation, we derive their equilibrium solutions and demonstrate that the Pareto improvement is achieved and social cost is decreased by using the permit revenues for expanding the bottleneck capacity.

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