Abstract: Historically, congestion pricing is considered to be an efficient mechanism used to decrease total social cost by charging users their true costs including congestion externalities. Congestion price under uncertainty has been relatively little studied. In this paper, the authors review the literature on deterministic congestion pricing and introduce possible sources of uncertainty for a simple bottleneck. The authors show that when prices involve exogenous uncertainty, that is independent of the central authority and of individual drivers, total social cost may be expressed in closed form as a function of departure time and uncertainty. The authors also show that there is a class of financial derivatives based on congestion that have the potential to reduce total social cost. In particular, such derivatives are shown to have the potential to alter drivers' departure behavior and reduce drivers' risks of high variance in trip costs, including congestion tolls. Finally, numerical formulations and examples are given to justify the robustness of our results with respect to more general congestion uncertainty.
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
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