Robot Cars and Dynamic Bottleneck Congestion: The Effects on Capacity, Value of Time and Preference Heterogeneity

Tinbergen Institute Discussion Paper 15-062/VIII

29 Pages Posted: 22 May 2015 Last revised: 7 Mar 2016

See all articles by Vincent A.C. van den Berg

Vincent A.C. van den Berg

VU University Amsterdam; Tinbergen Institute

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics; Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: March 4, 2016

Abstract

‘Robot cars’ are cars that allow for automated driving. By allowing cars to safely drive closer together than human driven ‘normal cars’ do, robot cars raise road capacity. By allowing drivers to perform other activities in the vehicle, they lower the value of travel time delays (VOT). We investigate the social welfare effect of robot cars using a dynamic equilibrium model of congestion that captures the following mechanisms: the resulting increase in capacity, the decrease in VOT and the implications for the heterogeneity in the VOT. We do so for a number of market organizations: private monopoly, perfect competition and public supply. Increasing the share of robot cars raises average capacity, but may hurt existing robot car users as the switchers, through their altered departure time behaviour, will impose higher congestion externalities. Depending on which effect dominates, buying a robot imposes a net negative or positive externality. Numerical analysis suggests that a net positive externality is more likely; nevertheless, for a small, but still plausible, capacity effect a net negative externality results. With a positive (negative) externality, marginal cost provision under perfect competition tends to lead to an undersupply (oversupply) of robot cars, and a public supplier needs to subsidise (tax) robot car purchase in order to maximise welfare. A monopolist supplier ignores the externality and tends to add a mark-up to its price. This almost always leads to a substantial undersupply.

Keywords: robot cars, heterogeneity, bottleneck model, autonomous cars, self-driving cars, market structure

JEL Classification: D42, D62, H23, L12, L51, R41, R48

Suggested Citation

van den Berg, Vincent A.C. and Verhoef, Erik T., Robot Cars and Dynamic Bottleneck Congestion: The Effects on Capacity, Value of Time and Preference Heterogeneity (March 4, 2016). Tinbergen Institute Discussion Paper 15-062/VIII. Available at SSRN: https://ssrn.com/abstract=2609278 or http://dx.doi.org/10.2139/ssrn.2609278

Vincent A.C. van den Berg (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

HOME PAGE: http://www.feweb.vu.nl/nl/afdelingen-en-instituten/spatial-economics/staff/v-berg/index.asp

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 020 4446094 (Phone)
+31 020 4446004 (Fax)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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