Richard Arnott

Economics of a bottleneck

This paper is the first in a series of papers which examine the economics of congestable facilities with peak-load demand, provides a thorough analysis of the simplest bottleneck model: A fixed number of individuals, one per car, must travel from home to work. Between home and work is a bottleneck of given capacity. The costs of travel include queuing time and schedule delay. Equilibrium with no toll, a coarse toll, and a fine toll are compared and optimal bottleneck capacity computed for each case.

Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?

The authors examine a situation in which insurance is characterized by moral hazard. When market insurance is provided, supplementary mutual assistance between family and friends (unobservable to market insurers) will occur. When nonmarket insurers have no better information than market insurers, the mutual assistance not only crowds out market insurance, but is also harmful and, therefore, dysfunctional. Alternatively, when nonmarket insurers can observe each others effort perfectly, mutual assistance is beneficial. These results point to the potential importance of peer-monitoring mechanisms in mitigating moral hazard. Copyright 1991 by American Economic Association.

Does Providing Information to Drivers Reduce Traffic Congestion

Abstract The purpose of this article is to question the presumption that route guidance and information systems necessarily reduce traffic congestion, and to point out the need to consider the general equilibrium effects of information. A simple model of the morning rush hour is adopted in which commuters choose a departure time and one of two routes to work, the capacities of which are stochastic. While expected travel costs are reduced by perfectly informing all drivers about route capacities, this is not necessarily the case if imperfect information is provided. A heuristic explanation is that, absent tolls, congestion is an uninternalized externality. Information can cause drivers to change their departure times in such a way as to exacerbate congestion.

Departure time and route choice for the morning commute

Most theoretical studies of traffic congestion during the morning commute have been limited to one origin, one destination, and one route. This paper is the first to analyze systematically user equilibrium, system optimum, and various pricing regimes for a simple network of routes in parallel. Departure time and route decisions of commuters are assumed to be governed by the tradeoff between travel time and schedule delay (the difference between actual and desired arrival time). In equilibrium without tolls wasteful queuing occurs, although the numbers of drivers on each route is the same as in the system optimum. An optimal time-varying toll eliminates queuing without affecting route usage. Uniform and step tolls alter route usage, but only slightly. Step tolls generally yield much greater efficiency gains than uniform tolls because they reduce queuing by altering departure times.

Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size

I. An example, 473.—II. The generality of the Henry George Theorem, 477.—III. On using land rents as a measure of the benefits from public goods, 490.—IV. Competitive attainability of a Pareto optimal distribution of economic activity, 496.—V. Concluding comments, 498.

The Transition of Land to Urban Use

This paper investigates the economics of the transition of land from rural to urban use. A simple model is employed to examine the developers problem: When and at what destiny should vacant land be developed to maximize the present value of the Land? A series of rules emerges from the analysis to the timing and density of new development. In the latter half of the paper, the rules are tested against recent Canadian experience and peform well.

Peer Group Effects and Educational Attainment

Given the aims of an educational system, the relationship between inputs and output, a distribution of student ability, and a fixed budget, how should students and expenditures be allocated over classrooms? This paper focuses on peer effects and the determinants of whether streaming or mixing is preferable. The efficient allocation is highly sensitive to the form in which peer group effects enter. This emphasizes the need for flexible functional forms in estimating educational production functions.

The Basic Analytics of Moral Hazard

This paper develops the basic analytics of moral hazard, for the two-outcome case where either a fixed damage accident occurs or it does not. The analysis focuses on the relationship between the insurance premium paid and the insurance benefits received in the event of an accident, and is conducted in benefit-premium space. The central message of the paper is that even when the underlying functions, the expected utility function and the function relating the accident probability to accident-prevention effort, are extremely well-behaved, the indifference curves and feasibility set (the set of insurance contracts which at least break even) are not-indifference curves need not be convex and feasibility sets never are; price-and income- consumption lines may be discontinuous; and effort is not in general a monotonic or continuous function of the parameters of the insurance policies provided. Part I of this paper establishes these results, while Part II discusses sane of their implications. The bad behavior of indifference curves and the feasibility set profoundly affects the nature and existence of a competitive equilibrium. We illustrate this, though we do not provide a thorough analysis. We also show that our canonical model of an insurance market with moral hazard can be reinterpreted to provide a model of loans with bankruptcy, or of work incentives.

A temporal and spatial equilibrium analysis of commuter parking

In major cities parking costs typically exceed automobile running costs, while the time to find a parking spot and walk to work can be comparable to driving time. Yet models of urban commuting have ignored parking completely. The purpose of this paper is to examine the effects of parking on morning rush hour congestion and to assess the relative merits of road tolls and parking fees as tools for congestion relief. The paper extends Vickreys (1969) bottleneck road congestion model by assuming on-street parking is located along commuting routes radiating from the CBD. Absent pricing, drivers occupy parking spots in order of increasing distance from the CBD. Three pricing schemes are considered: 1) an optimal time-varying road toll, 2) competitively set parking fees, and 3) optimal location-dependent parking fees. The optimal road toll is shown to eliminate queueing, but does not affect the order in which parking spots are occupied. In contrast, competitive parking fees do nothing to reduce queueing , but induce drivers to park in order of decreasing distance from the CBD, so that in the aggregate commuters arrive at work closer to their preferred time. Optimal parking fees reduce queueing in addition to supporting the efficient order of parking. For reasonable parameter values competitively set parking fees are found to be relatively inefficient-indeed potentially welfare-reducing. Optimal parking fees, however, are generally superior to a road toll. In light of the logistical drawbacks of tolls and political opposition that road pricing has met, this suggests that parking fees deserve more attention than they have received in the literature.

Route choice with heterogeneous drivers and group-specific congestion costs☆

Abstract This paper focuses on the interaction between two aspects of road transportation previously considered only separately - user heterogeneity and route choice. The model, which treats two groups and two parallel routes, is static, though it includes as a special case the reduced form of Vickreys dynamic bottleneck model. In equilibrium groups may travel together or separately, depending on the relative magnitude of own- and cross-group congestion costs. Optimal tolls are solved for both integrated and separated usage. In the bottleneck case, separated usage may be optimal if one group has both higher travel time and schedule delay costs.