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JEL Classification:

D4, H2, L1, R4

Abstract

Fleets of ridesharing companies, such as Uber and Lyft, are providing an increasing share of passenger travel. This trend is bound to grow following the development of autonomous vehicles. We analyze the welfare effects of the transition from a decentralized regime, in which travelers are atomistic and do not internalize the congestion externality, to a centralized regime, where travelers are supplied by a fleet of autonomous vehicles controlled by a monopolist. Individuals are heterogeneous in the disutility from congestion. They may travel on one of two lanes, endogenously different in congestion, or they may not travel. We show that a centralized regime is always welfare-reducing when the monopolist does not ration travel. If instead rationing occurs, a centralized regime may be welfare-enhancing when congestion costs are sufficiently high. We then analyze efficient road taxes. While congestion charges are optimal under decentralization, taxes differ markedly in a centralized regime, where restoring first best may require subsidizing the monopolist.

Keywords:

congestion; congestion externalities; fleets; autonomous vehicles; congestion charges