Reference : Modal choice and optimal congestion
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Business & economic sciences : Special economic topics (health, labor, transportation…)
Modal choice and optimal congestion
David, Quentin mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Foucart, Renaud [> >]
Center for Research in Economic Analysis, University of Luxembourg
[en] Modal choice; Coordination; Network effect; Cross-modal congestion
[en] We study the choice of transportation modes within a city where commuters have het- erogeneous preferences for a car. As in standard models of externalities, the market outcome never maximizes aggregate welfare. We show that in the presence of multiple equilibria prob- lems of coordination can worsen this result. Hence, a social planner focusing on the marginal impact of policies may miss the largest source of inefficiency. We discuss two policy tools: taxation and traffic separation (e.g. exclusive lanes for public transportation). Setting the optimal levels of taxation and of traffic separation constitutes a necessary but not a sufficient condition to reach the first best equilibrium. Comparing the relative efficiency of both poli- cies, we show that traffic separation should be preferred for large-scale policies while taxation better applies to marginal modifications of commuting patterns.
CREA Discussion Paper Series

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