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Should I stay or should I go? Congestion pricing and equilibrium selection in a transportation network
Univ Campania Luigi Vanvitelli, Dept Polit Sci Jean Monnet, Caserta, Italy..
Univ New South Wales, Sch Civil & Environm Engn, Sydney, NSW, Australia..
Örebro University, Örebro University School of Business. Georgia State Univ, Ctr Econ Anal Risk, Atlanta, GA 30309 USA.;Orebro Univ, Dept Econ, Orebro, Sweden.;Univ Cape Town, Dept Econ, Rutstrom, South Africa..ORCID iD: 0000-0001-8616-3318
2022 (English)In: Theory and Decision, ISSN 0040-5833, E-ISSN 1573-7187, no 93, p. 535-562Article in journal (Refereed) Published
Abstract [en]

When imposing traffic congestion pricing around downtown commercial centers, there is a concern that commercial activities will have to consider relocating due to reduced demand, at a cost to merchants. Concerns like these were important in the debates before the introductions of congestion charges in both London and Stockholm and influenced the final policy design choices. This study introduces a sequential experimental game to study reactions to congestion pricing in the commercial sector. In the game, merchants first make location choices. Consumers, who drive to do their shopping, subsequently choose where to shop. Initial responses to the introduction of congestion pricing and equilibrium selection adjustments over time are observed. These observations are compared to responses and adjustments in a condition where congestion pricing is reduced from an initially high level. Payoffs are non-linear and non-transparent, making it less than obvious that the efficient equilibrium will be selected, and introducing possibilities that participants need to discover their preferences and anchor on past experiences. We find that initial responses reflect standard inverse price-demand relations, and that adjustments over time rely on signaling by consumers leading to the efficient equilibrium. There is also evidence that priming from initial experiences influence play somewhat. We confirm that commercial activities relocate following the introduction of congestion pricing and that the adjustment process is costly to merchants.

Place, publisher, year, edition, pages
Springer, 2022. no 93, p. 535-562
Keywords [en]
Noncooperative games, Micro-based behavioral economics, Transportation: demand, supply and congestion, Government pricing and policy
National Category
Economics
Identifiers
URN: urn:nbn:se:oru:diva-96725DOI: 10.1007/s11238-021-09852-xISI: 000742587000002Scopus ID: 2-s2.0-85123099249OAI: oai:DiVA.org:oru-96725DiVA, id: diva2:1632517
Note

Funding agency:

US Federal Highway Administration DTFH61-09-H-00012

Available from: 2022-01-27 Created: 2022-01-27 Last updated: 2023-12-08Bibliographically approved

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Rutström, Elisabet

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