Individual tradable permit market and traffic congestion:
An experimental study
Kean Siang, CH’NG
School of Social Sciences
Universiti Sains Malaysia
11800 Penang
Malaysia
Email: [email protected]
Abstract
This paper investigates 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 evaluation of this system shows that traders
exhibit strong dependence on reservation price and there are significant transfers of
permit from low value users to high value users. During peak hours, the permit price
increases owing to high demand, so the cost of using the road is high during congestion.
This creates incentive for low value drivers to postpone their trips and resell permits in
the peak hours to gain profit. The results show the delayer pays principle, in which
drivers who value highly have to pay drivers who are willing to stay off the road during
peak hours.
JEL Classification: C91, D61, R41
Keywords: Individual tradable permit, Congestion, High value and low value drivers,
Allocative efficiency
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