Marginal cost pricing analysis on tradable credits in traffic engineering

Abstract

This paper tries to explore a more applicable tradable credit scheme for managing network mobility from the angle of marginal cost pricing. The classic mathematical model-Cobweb model is used to analyze the stability of credit price. It is found that credit price is not always convergent in the trading market. It will show convergence, divergence, two-period simple behaviors, and even more complex dynamic behaviors, such as cycle movements and chaos. Considering the applicability and public goods character of tradable credits scheme, one public pricing mechanism- marginal cost pricing is explored. Analytical investigations and the numerical simulation of a particular case with linear demand and supply indicate that marginal cost pricing is an effective, sustainable, and socially feasible manner in managing the demand for car travel.