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Seminar - Congestion and Incentives in the Age of Driverless Cars

  • S320 (Paul Webley Wing), SOAS University of London (map)

Speaker: Alberto Iozzi, Associate Professor of Economics, Department of Economics and Finance, University of Rome ‘Tor Vergata’
Chair: Victor Murinde, AXA Professor in Global Finance, SOAS University of London

Abstract
GPS systems and Autonomous Vehicles (AVs) will likely open the way to forms of traffic coordination, or centralization. We analyze the welfare effects of moving from an environment with atomistic drivers to one in which few companies will manage the traffic. Differently than what happens with atomistic drivers, such  companies or organizations will have an incentive to consider the congestion externality imposed by their vehicles on the other vehicles they dispatch. We analyze both a setting with no road taxes, to reflect their limited application and the popular opposition to them, as well as a setting with road taxes. We find that, without road taxes, the emergence of a small company supplying a small fraction of the travelers (while the others remain atomistic) increases (decreases) welfare if and only if the congestion problem was (was not) sufficiently severe in the first place. With road taxes, we find that, while congestion charges are optimal when all travelers are atomistic, the structure of the taxes differs markedly with a company that supplies a mass of customers. Restoring first best, in this case, may require subsidizing the company – something likely to be politically very unappealing.

Co-authors: Federico Boffa (Free University of Bozen), Alessandro Fedele (Free University of Bozen) 

A sandwich lunch will be served.

The seminars are sponsored by grants from DFID and ESRC [ESRC Ref: ES/N013344/2], ESRC and NSFC [ESRC Ref: ES/P005241/1] and AXA Research Fund