Towards the Market Design of a Congestion Trading Scheme

Forbes,Samuel (2014). Towards the Market Design of a Congestion Trading Scheme Master's Thesis, School of Economics, The University of Queensland.

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Author Forbes,Samuel
Thesis Title Towards the Market Design of a Congestion Trading Scheme
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2014-11-11
Thesis type Master's Thesis
Supervisor Flavio Menezes
Total pages 70
Language eng
Subjects 14 Economics
Formatted abstract
This paper explores the application of market design principles to the market failure of traffic congestion. Congestion drains a dead weight loss of approximately $10 billion from the Australian economy annually. These costs have various sources which are briefly explored however the focus of this paper is to frame congestion as an allocation problem. Through an analysis of the theory of external costs and the current institutions governing the allocation of transport resources the site of the biggest problem, but also greatest potential solution, is identified in the value of time. Travel time savings are highly heterogeneous in the population and also represent private information of each individual traveller. In order to move toward a more efficient allocation of transport resources a mechanism design that coerces the revelation of this private information is necessary. Of the available instruments in the literature the permit trading scheme is suggested as the mechanism which has the most potential to remedy this information asymmetry. This paper proposes a product for trade in a permit market as well as an implementable market design policy, with recognition for the detail and costs involved in such an implementation.
Keyword Traffic congestion
Market design

Document type: Thesis
Collection: UQ Theses (non-RHD) - UQ staff and students only
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Created: Mon, 06 Jul 2015, 11:14:09 EST by Mr Yun Xiao on behalf of Scholarly Communication and Digitisation Service