Introducing Autonomous Vehicles: Formulation and Analysis

34 Pages Posted: 10 Oct 2018 Last revised: 17 Apr 2019

See all articles by Opher Baron

Opher Baron

University of Toronto - Operations Management

Oded Berman

University of Toronto - Rotman School of Management

Mehdi Nourinejad

University of Toronto - Rotman School of Management

Date Written: September 17, 2018

Abstract

Problem definition: Autonomous vehicles (AVs) are predicted to enter the consumer market in less than a decade. There is currently no consensus on whether their presence will have a positive impact on users and society. The skeptics of automation foresee increased congestion, whereas the advocates envision smoother traffic with shorter travel times. In this paper, we study the automation controversy and advise policymakers on how and when to promote AVs. Academic/Practical Relevance: The AV technology is advancing rapidly and there is a need to study its impact on social welfare and the likelihood of its adoption by the public. Methodology: We use supply-demand theory to find the equilibrium number of trips for autonomous and regular households. We present a peer-to-peer sharing business model for AV owners where a coalition of households shares a fleet of AVs. We compare the socially optimal level of automation with the user equilibrium adoption patterns where the households selfishly choose their vehicle type. Results: We establish that a sound judgment of automation relies on the occurrence of three possible cases for which full, null, or partial automation is recommended. The cases are influenced by: (i) the network connectivity that is the ability of the infrastructure to serve autonomous vehicles, (ii) the additional comfort provided by autonomous vehicles that allows passengers to engage in other productive activities instead of driving, and (iii) the peer-to-peer sharing contract among users that reduces ownership costs, but decreases the average vehicle occupancy (thus creating additional traffic). Managerial implications: We present policy spaces that map the benefits of autonomous vehicles for different operating conditions and cities. We advance the discussion on the automation debate by deriving intuition on the impact of AVs on social welfare. We show that the comfort of AVs may create additional traffic that compromises social welfare. Moreover, although traffic increases with automation, travel times may decrease because of significant improvements in traffic flow caused by automation.

Keywords: Transportation, Public Policy

Suggested Citation

Baron, Opher and Berman, Oded and Nourinejad, Mehdi, Introducing Autonomous Vehicles: Formulation and Analysis (September 17, 2018). Available at SSRN: https://ssrn.com/abstract=3250557 or http://dx.doi.org/10.2139/ssrn.3250557

Opher Baron

University of Toronto - Operations Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada

Oded Berman

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Mehdi Nourinejad (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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