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 with a single OD pair. It is proved that equilibrium resource allocation is efficient in the sense that the total transportation cost in a network is minimized. It is also shown that the “self-financing principle” holds for the TBP system. Furthermore, theoretical relationships between TBP and congestion pricing (CP) are 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 efficiency result also holds for more general demand conditions.