1. Examine the differences between surge and congestion pricing. Give a specific instance of how each is being used right now.
2. There are various auction formats, each with advantages and disadvantages for determining an item’s true cost or worth. Give examples of how each of the following uncovers value, and compare and contrast how they do so:
o The Dutch auction as well as the English auction.
o The Vickery Auction and the sealed-bid first-price auction.
o Auctions are commonly employed. Examine how each of the following would operate in a real auction:
3. A state or federal agency or the government of a state or federal agency.
o A for-profit enterprise.
o For each, describe the type of auction used and how it resolves the issue.
Overview
Congestion pricing, also known as value pricing, is a method of using the market’s power to cut down on the waste brought on by traffic congestion. Congestion pricing works by taking advantage of the fact that the majority of rush hour drivers on a typical metropolitan highway are not commuters and transferring some rush hour highway travel to other forms of transportation or to off-peak times.
Pricing makes the system operate much more effectively, allowing more automobiles to pass through the same physical space by removing a portion (even as little as 5% of the vehicles from a congested roadway). Similar variable prices, such as those for airline tickets, cell phone plans, and electricity rates, have been effectively applied in other industries. The majority of economists agree that congestion pricing represents the single most viable and sustainable approach to reducing traffic congestion.
At its most basic level, a lack of a system to effectively control capacity use is what contributes to highway congestion. Most people think of adding a new lane to a congested roadway as the first step in finding a solution to the congestion issue. In metropolitan regions, the average cost of building a lane mile is $10 million. Typically, the tax that motorists pay while filling up their cars with petrol provides the funds for this building. Only $60,000 a year is raised overall from gas taxes on an extra lane during rush hour. This sum will not cover the cost of the lane extension in the slightest.
