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Enrica Carbone (Seconda Università degli Studi di Napoli)

8 November 2016 @ 12:00

 

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Date:
8 November 2016
Time:
12:00
Event Category:

“Equilibria in Transportation Games with Road Pricing”

abstract

As congestion pricing is becoming increasingly popular as a solution to traffic congestion in many parts of the world, one issue is how it affects the location of commercial activities. If a cordon charge is constructed around a city center, as in London and Stockholm, for example, will this result in a loss in retail business in the downtown area as the cost to shoppers of driving to these shops will increase with the cordon? We construct an experiment where 6 or 8 commuters drive from home to work and back each day, shopping each day on the way back. They can choose between taking a downtown route or a perimeter route. If they take the downtown route they have to pay a fee. The perimeter route is longer and takes more time to drive, but there is no fee. There are two merchants that choose a store location in each round, before the commuters make their route choices. There are 3 treatments with different equilibria predictions: With a $0 fee the prediction is that merchants are shoppers will be using the downtown retail area. With a $4 cordon charge the prediction is that no shoppers will go downtown to shop and merchants will therefore locate on a perimeter route, outside the city center. With a $3 charge there are four pure Nash Equilibria.  The travel time cost in the experiment is constructed using traffic simulation models of the kind used in transportation planning, to give participants a flavor of realism. Participants view a sample simulation from the set built for the purposes of calculating travel times for the experiment.

We find that subjects quickly converge to an outcome close to the Nash Equilibrium in both the $0 and $4 cases, where the equilibria are unique. In the $3 cordon case, we find that merchants converge on the perimeter equilibrium. The merchants are indifferent between the two Nash Equilibria, but the commuters make higher earnings in the Perimeter equilibrium.