Flextime, Traffic Congestion and Urban Productivity

How many firms choose to adopt flextime without any policy intervention? Does promoting flextime improve social welfare? This paper addresses these two questions. We extend the model of bottleneck congestion to describe the case in which some firms in a city adopt flextime. The model also incorporates effects on urban productivity via agglomeration economy. Each firm chooses whether to adopt flextime or not, taking into account the trade-off between productivity and congestion. Equilibrium determines the number of firms adopting flextime and commuters' departure patterns. We investigate the conditions in which flextime is adopted in equilibrium. Moreover, we demonstrate that multiple equilibria with respect to the number of firms adopting flextime may arise. The less efficient solution, the one without flextime, is likely to persist. We also examine the effect of a congestion toll on social welfare. © 2006 LSE and the University of Bath