Financial Tools for the Abatement of Traffic Congestion: A Dynamical Analysis

In this article we propose a simple mechanism aimed at implementing and supporting environmental protection policies in urban areas based on innovative financial instruments issued by a policy maker (PM), which can be buyed by two categories of involved agents, city users (CU) and agencies providing the city services. According to this mechanism, virtuous service providers choosing to offer high quality services can obtain cost abatement. CU, reciprocally, have to pay for entering into the city, but can protect themselves against a city low quality of life by a self-insurance device. The interaction of these two categories of economic agents is modelled by a two-population evolutionary game, where the population of CU strategically interacts with that of service providers. From the analysis of the model it emerges that such a dynamics may lead to a welfare-improving attracting Nash equilibrium at which all CU choose to use environmental-friendly means of transportation and all service providers choose to offer high quality services. However, the basin of attraction of that equilibrium may have a rather complex morphology. In particular more attractors and/or limit cycles can be present. In such a context we indicate sufficient conditions making the virtuous equilibrium a global attractor for all trajectories starting at a mixed-strategy point. © 2011 Springer Science+Business Media, LLC.