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Individual Tradable Permit Market And Traffic Congestion: An Experimental Study

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Author(s): Kean Siang Ch’ng

Journal: Arts and Social Sciences Journal
ISSN 2151-6200

Volume: 2012;
Start page: ASSJ-40;
Date: 2012;
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Keywords: Individual tradable permit | congestion | high-value and low-value drivers | allocative efficiency

ABSTRACT
The increasing vehicular traffic and the consequent over-consumption have emerged as the results of rapid motorization and urbanization throughout the world. Variety of measures have been attempted to deal with the vehicular problems. This paper was intended to investigate the potential of an individual tradable permit system in an experimental two-sided repeated double auction market to overcome over-consumption through road demand management. The auction began with the local authority distributing access rights to the vehicular owners. The owners could either use up the permit or to purchase permit from the open market. The latter allowed usage beyond the owner’s quota. The system showed that traders exhibited strong dependence on reservation price and there were significant transfers of permit from low-value users to high-value users: low-value owners sold access rights to high-value owners. Consequently, in the peak hours, the permit price increased owing to high demand, so the cost of using the road was high during congestion. This created incentive for low-value drivers to postpone their trips and resold permits in the peak hours to gain profit. The results showed the delayer pays principle, in which drivers who valued highly had to pay drivers who were willing to stay off the road during peak hours.
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