Will all autonomous cars cooperate? Brands' strategic interactions under dynamic congestion

Tinbergen Institute Discussion Paper 2022-003/VIII > save

43 Pages Posted: 19 Mar 2022

See all articles by Xiaojuan Yu

Xiaojuan Yu

VU University Amsterdam

Vincent A.C. van den Berg

VU University Amsterdam; Tinbergen Institute

Erik Verhoef

VU University Amsterdam

Zhi-Chun Li

Huazhong University of Science and Technology - School of Management

Date Written: February 3, 2022

Abstract

Autonomous cars allow safe driving with a smaller headway than that required for normal human-driven cars, thereby potentially improving road capacity. To attain this capacity benefit, cooperation among autonomous cars is vital. However, the future market may have multiple car brands and the incentive for them to cooperate is unknown. This paper investigates competition and cooperation between multiple car brands, which may offer both autonomous and normal cars. In particular, we develop a two-stage game theoretic model to investigate strategic interactions and evaluate, from both policy and organizational perspectives, the implications of their cooperation incentives and pricing competition. We compare four market structures: duopoly competition, perfect competition, a public welfare-maximizing monopoly, and a private profit-maximizing monopoly. Various parameters are evaluated, including factors such as price elasticity, capacity effects, and cooperation cost. This evaluation provides policy insights into actions that could be considered by regulators and organizations for the operation of autonomous cars.

Keywords: Autonomous cars, Cooperation strategy, Duopoly competition, Game theory, Regulatory policy

JEL Classification: D21, R41, D43

Suggested Citation

Yu, Xiaojuan and van den Berg, Vincent A.C. and Verhoef, Erik and Li, Zhi-Chun, Will all autonomous cars cooperate? Brands' strategic interactions under dynamic congestion (February 3, 2022). Tinbergen Institute Discussion Paper 2022-003/VIII > save, Available at SSRN: https://ssrn.com/abstract=4025321 or http://dx.doi.org/10.2139/ssrn.4025321

Xiaojuan Yu (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Vincent A.C. van den Berg

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 Verhoef

VU University Amsterdam ( email )

Netherlands

Zhi-Chun Li

Huazhong University of Science and Technology - School of Management

1037 Luoyu Road
Wuhan, Hubei 430074
China

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