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A note on the distortionary effects of revenue-neutral tolls in a bottleneck congestion game

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  • Janusch, Nicholas

Abstract

This note demonstrates how the redistribution of revenue from a Pigouvian policy can distort incentives and handicap the social objectives of the policy by creating a moral hazard problem. Based on the Levinson (2005) game theory model, I develop a three-player bottleneck congestion game that emulates a repeated prisoner’s dilemma and derive efficient tolls. This conceptual game demonstrates the distortionary effects from a revenue-neutral toll policy with lump-sum revenue redistribution and the equity-efficiency tradeoff.

Suggested Citation

  • Janusch, Nicholas, 2016. "A note on the distortionary effects of revenue-neutral tolls in a bottleneck congestion game," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 95-103.
    • Handle: RePEc:eee:transa:v:92:y:2016:i:c:p:95-103
    DOI: 10.1016/j.tra.2016.07.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Game theory; Congestion; Pricing; Revenue recycling; Acceptability;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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