Congestion derivatives for a traffic bottleneck

Tao Yao, Terry Lee Friesz, Mike Mingcheng Wei, Yafeng Yin

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

Historically, congestion pricing is considered to be an efficient mechanism used to decrease total social cost by charging users' true costs including congestion externalities. Congestion pricing under uncertainty has been relatively little studied. In this paper, we review the literature on deterministic congestion pricing and introduce possible sources of uncertainty for a simple bottleneck. We show that, when prices involve exogenous uncertainty that is independent of the central authority and of individual drivers, total social cost may be expressed in closed form as a function of departure time and uncertainty. We also show that there is a class of financial derivatives based on congestion that have the potential to reduce total social cost. In particular, such derivatives are shown to have the potential to alter drivers' departure behavior and reduce drivers' risks of high variance in trip costs, including congestion tolls. Finally, numerical formulations and examples are given to justify the robustness of our results with respect to more general congestion uncertainty.

Original languageEnglish (US)
Pages (from-to)1149-1165
Number of pages17
JournalTransportation Research Part B: Methodological
Volume44
Issue number10
DOIs
StatePublished - Jan 1 2010

Fingerprint

uncertainty
traffic
Derivatives
social costs
pricing
driver
Costs
financial derivatives
costs
Congestion
Uncertainty
Congestion pricing
Social costs

All Science Journal Classification (ASJC) codes

  • Civil and Structural Engineering
  • Transportation

Cite this

Yao, Tao ; Friesz, Terry Lee ; Wei, Mike Mingcheng ; Yin, Yafeng. / Congestion derivatives for a traffic bottleneck. In: Transportation Research Part B: Methodological. 2010 ; Vol. 44, No. 10. pp. 1149-1165.
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Congestion derivatives for a traffic bottleneck. / Yao, Tao; Friesz, Terry Lee; Wei, Mike Mingcheng; Yin, Yafeng.

In: Transportation Research Part B: Methodological, Vol. 44, No. 10, 01.01.2010, p. 1149-1165.

Research output: Contribution to journalArticle

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