On the potential remedies for license plate rationing

This paper analyzes three travel demand management policies designed to correct the shortcomings of license plate rationing (LPR). The first policy couples LPR with a new vehicle quota scheme that directly controls auto ownership. The other two policies turn the driving permit into a tradable commodity. They differ, however, in that one policy ties the permit to the license plate while the other bestows all travelers with equal driving permits. All new policies may be viewed as “derivatives” of LPR because they share some key features: simplicity and revenue neutrality. Using a conceptual model that considers two modes (transit and driving) and user heterogeneity, we analyze user equilibrium solutions under each new policy, and for policies based on permit trading, introduce and characterize a function that links individuals' trading behavior to their value of time. Our analysis and numerical experiments show that giving tradable permits to all travelers is more efficient than the other alternatives. Under this policy, travelers who decide to own automobiles will acquire enough permits from those who do not so that the former can drive without any restriction. Consequently, the permit each traveler should receive can be easily determined from the ratio between a desired highway flow level and the total demand. Importantly, when the desired flow level equals the system optimal flow, the policy is revenue-neutral and first-best under idealized conditions.