Munich Personal RePEc Archive

Congestion costs in bottleneck equilibrium with stochastic capacity and demand

Fosgerau, Mogens (2008): Congestion costs in bottleneck equilibrium with stochastic capacity and demand.

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Abstract

I analyse congestion costs in the Vickrey bottleneck model of a congestible facility with a peak load in demand. The shape of the peak is endogenous, being the sum of individual scheduling decisions. Capacity and demand are random, which introduces uncertainty into the individual scheduling choices. These are essential features of actual peak loads. Based on work by Arnott, de Palma and Lindsey, I derive the expected marginal and total congestion costs and compare to the case with fixed capacity and demand. Using stylised values for scheduling costs relative to the value of time, I find that randomness of capacity and demand increases congestions cost by up to 50 percent relative to the deterministic case. The bound is general for any distribution of random capacity and demand.

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