19 Pages Posted: 7 Sep 2022 Last revised: 8 Nov 2022
Date Written: September 14, 2022
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: Suggested Citation