Robot Cars and Dynamic Bottleneck Congestion : The Effects on Capacity, Value of Time and Preference Heterogeneity

‘Robot cars' are cars that allow for automated driving. By allowing cars to safely drive closer together than human driven ‘normal cars' do, robot cars raise road capacity. By allowing drivers to perform other activities in the vehicle, they lower the value of travel time delays (VOT). We investigate the social welfare effect of robot cars using a dynamic equilibrium model of congestion that captures the following mechanisms: the resulting increase in capacity, the decrease in VOT and the implications for the heterogeneity in the VOT. We do so for a number of market organizations: private monopoly, perfect competition and public supply. Increasing the share of robot cars raises average capacity, but may hurt existing robot car users as the switchers, through their altered departure time behaviour, will impose higher congestion externalities. Depending on which effect dominates, buying a robot imposes a net negative or positive externality. Numerical analysis suggests that a net positive externality is more likely; nevertheless, for a small, but still plausible, capacity effect a net negative externality results. With a positive (negative) externality, marginal cost provision under perfect competition tends to lead to an undersupply (oversupply) of robot cars, and a public supplier needs to subsidise (tax) robot car purchase in order to maximise welfare. A monopolist supplier ignores the externality and tends to add a mark-up to its price. This almost always leads to a substantial undersupply