Tradable Network Permits : A New Scheme for the Most Efficient Use of Network Capacity

Akamatsu et al.(2006) proposed a new transportation demand management scheme called “tradable bottleneck permits” (TBP), and proved its efficiency properties for a single bottleneck model. This paper explores the properties of a TBP system for general networks. An equilibrium model is first constructed to describe the states under the TBP system. It is proved that equilibrium resource allocation is efficient in the sense that the total transportation cost in a network is minimized. Theoretical relationships between TBP and congestion pricing (CP) are also discussed. It is demonstrated that TBP has definite advantages over CP when demand information is not perfect, whereas both TBP and CP are equivalent for the perfect information case. Finally, it is shown that the “self-financing principle” also holds for the TBP system.