Tradable permits to manage urban mobility: Market design and experimental implementation

Devi K. Brands*, Erik T. Verhoef, Jasper Knockaert, Paul R. Koster

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Congestion levels remain a substantial challenge, while the traditional economic response to congestion – road pricing – remains politically infeasible in most locations. Tradable permits are likely to be a more viable alternative, because they do not require a net financial flow from road users to the government. It is therefore the right moment to design and empirically test tradable permit schemes for managing urban mobility. This paper presents and empirically tests a complete design of a market for tradable permits, both in terms of the conceptual set-up of the market as well as its technical implementation. The design is evaluated against a number of criteria, including: transparency and containment of transaction costs, stability of permit prices in relation to the dynamic equilibrium on the mobility market and the prevention of undesirable speculation and fraud. We present evidence of the empirical functioning of this market, using the results of a conducted lab-in-the-field experiment with virtual mobility behaviour and real financial incentives.

Original languageEnglish
Pages (from-to)34-46
Number of pages13
JournalTransportation Research. Part A, Policy and Practice
Volume137
DOIs
Publication statusPublished - Jul 2020

Funding

We thank anonymous referees for their useful comments and suggestions. We further want to thank the audiences of the 2018 ITEA conference in Hong Kong and of the spatial economics seminar at the VU Amsterdam for useful comments. This work is supported by funding of VerDuS? Smart Urban Regions of the Future (SURF) program as part of the U-SMILE project 438-15-176, and by the European Union's Horizon 2020 program as part of IP-SUNTAN project 5597288, which is gratefully acknowledged.

FundersFunder number
European Union's Horizon 2020 program
Horizon 20205597288

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