Pareto Improvement Properties of Tradable Permit Systems for a Tandem Bottleneck Network

Abstract

Akamatsu et al.(2006) proposed “tradable bottleneck permits”(TBP) system and showed theoretical properties of the TBP system for a single bottleneck network. In this paper, we examine some economic properties of the TBP system for a tandem bottleneck network. We first reveal that the equilibrium dynamic flow pattern under the TBP system minimizes the total travel cost of the network. We then show that under the TBP system, (1) Pareto improvement can be achieved, if revenue from the permits is redistributed to users, (2) Pareto improvement is not necessarily achieved, otherwise.