Four-Way Stops

19 Pages Posted: 7 Sep 2022 Last revised: 8 Nov 2022

See all articles by Jiasun Li

Jiasun Li

George Mason University - Department of Finance

Date Written: September 14, 2022

Abstract

Billions of people drive through crossroads every day. We investigate mechanisms ensuring orderly passing at crossroads and question the familiar practice of electing four stop signs in each direction, showing that it is not a Nash equilibrium for all drivers to abide by. Alternatively, we prove that electing only three stop signs induces universal abidance as a unique symmetric equilibrium. This equilibrium enjoys significant savings in drivers' time, infrastructure costs, carbon/pollutants emissions, and police expenditure. For example, for carbon emission reduction alone, the new mechanism is estimated to save at least 2.7 days of gas consumption annually.

Keywords: carbon emission, infrastructure spending, game theory, mechanism design, Nash equilibrium, police funding, traffic

JEL Classification: A12, C72, D49, H79, K39, L99, Q35, Q49, Q53, Q54, R41

Suggested Citation

Li, Jiasun, Four-Way Stops (September 14, 2022). George Mason University School of Business Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4197885 or http://dx.doi.org/10.2139/ssrn.4197885

Jiasun Li (Contact Author)

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States

HOME PAGE: http://sites.google.com/view/jiasunli

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