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Securitizing congestion: The congestion call option

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  • Friesz, Terry L.
  • Mookherjee, Reetabrata
  • Yao, Tao

Abstract

We introduce the idea of a European-type congestion call option to value commuting to work along a given path for a given departure time selected by automobile drivers who are modeled as Cournot-Nash non-cooperative agents competing for limited roadway capacity when the alternative of telecommuting exists. We show how to compute flow patterns based on congestion call options and contrast these to traditional user optimized flow patterns. In particular, a numerical example is presented that shows congestion options have the potential to lower the network-wide social costs of congestion.

Suggested Citation

  • Friesz, Terry L. & Mookherjee, Reetabrata & Yao, Tao, 2008. "Securitizing congestion: The congestion call option," Transportation Research Part B: Methodological, Elsevier, vol. 42(5), pages 407-437, June.
    • Handle: RePEc:eee:transb:v:42:y:2008:i:5:p:407-437
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    References listed on IDEAS

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    1. Friesz, Terry L. & Mookherjee, Reetabrata, 2006. "Solving the dynamic network user equilibrium problem with state-dependent time shifts," Transportation Research Part B: Methodological, Elsevier, vol. 40(3), pages 207-229, March.
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    5. Kober, Rodman & Baumel, C. Phillip, 1990. "Transportation Forward Contracting or Options: A Description of and Analysis of an Application to Railroads," Staff General Research Papers Archive 11691, Iowa State University, Department of Economics.
    6. Terry L. Friesz & David Bernstein & Tony E. Smith & Roger L. Tobin & B. W. Wie, 1993. "A Variational Inequality Formulation of the Dynamic Network User Equilibrium Problem," Operations Research, INFORMS, vol. 41(1), pages 179-191, February.
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    Cited by:

    1. Chow, Joseph Y.J. & Regan, Amelia C., 2011. "Network-based real option models," Transportation Research Part B: Methodological, Elsevier, vol. 45(4), pages 682-695, May.
    2. Sumalee, A. & Zhong, R.X. & Pan, T.L. & Szeto, W.Y., 2011. "Stochastic cell transmission model (SCTM): A stochastic dynamic traffic model for traffic state surveillance and assignment," Transportation Research Part B: Methodological, Elsevier, vol. 45(3), pages 507-533, March.
    3. Zheng, Shiyuan & Wang, Kun & Chan, Felix T.S. & Fu, Xiaowen & Li, Zhi-Chun, 2022. "Subsidy on transport adaptation investment-modeling decisions under incomplete information and ambiguity," Transportation Research Part B: Methodological, Elsevier, vol. 162(C), pages 103-129.
    4. David Watling & Giulio Cantarella, 2015. "Model Representation & Decision-Making in an Ever-Changing World: The Role of Stochastic Process Models of Transportation Systems," Networks and Spatial Economics, Springer, vol. 15(3), pages 843-882, September.
    5. Han, Linghui & Zhu, Chengjuan & Wang, David Z.W. & Sun, Huijun & Tan, Zhijia & Meng, Meng, 2019. "Discrete-time dynamic road congestion pricing under stochastic user optimal principle," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 24-36.
    6. Li, Zhi-Chun & Guo, Qian-Wen & Lam, William H.K. & Wong, S.C., 2015. "Transit technology investment and selection under urban population volatility: A real option perspective," Transportation Research Part B: Methodological, Elsevier, vol. 78(C), pages 318-340.
    7. Yang, Hai & Wang, Xiaolei, 2011. "Managing network mobility with tradable credits," Transportation Research Part B: Methodological, Elsevier, vol. 45(3), pages 580-594, March.
    8. Guo, Qianwen & Chen, Shumin & Sun, Yanshuo & Schonfeld, Paul, 2023. "Investment timing and length choice for a rail transit line under demand uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 175(C).
    9. Zhong, R.X. & Sumalee, A. & Friesz, T.L. & Lam, William H.K., 2011. "Dynamic user equilibrium with side constraints for a traffic network: Theoretical development and numerical solution algorithm," Transportation Research Part B: Methodological, Elsevier, vol. 45(7), pages 1035-1061, August.
    10. Ren-Yong Guo & Hai Yang & Hai-Jun Huang & Zhijia Tan, 2016. "Day-to-Day Flow Dynamics and Congestion Control," Transportation Science, INFORMS, vol. 50(3), pages 982-997, August.

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