Richard J. Arnott

• SB, PhD
• Professor (Full) at University of California, Riverside

Donald Shoup, following Vickrey, has long advocated cashing out free and underpriced parking. How should this be implemented for curbside parking in practice, considering the stochasticity of curbside parking vacancies? Shoup has proposed adjusting meter rates such that, for each block and time period, a target (average) curbside parking occupancy...

Previous work in the economic theory of parking has treated parkers as homogeneous. In almost all policy contexts, however, heterogeneity among individuals matters not only quantitatively but also qualitatively. For example, providing both tolled and untolled alternatives allows those with high values of time to pay largely with money and those wit...

In downtown areas, what proportion of curbside should be allocated to parking? In contrast to most previous work on the economics of parking, this paper focuses on optimal curbside parking capacity in both first-best (where pricing is efficient) and second-best (where pricing is inefficient) environments. It first considers the situation where ther...

The new urban economics views the urban economy from a general equilibrium perspective. It improves on earlier theories by permitting an integrated treatment of different facets of the urban economy, such as land use, transportation, housing, local public finance, and environmental quality. Its centrepiece is the monocentric city model, which descr...

A simulation model is a parameterised model that is solved on the computer since it is too complex to solve analytically. Most economic simulation models are used to forecast the effects of policies. This article reviews a class of simulation models that builds on the new urban economics, which views the urban economy from the perspective of compet...

Economists and planners are often at loggerheads. Economists see the strengths of markets while planners see their weaknesses. This article aims to initiate a productive dialogue between economists and planners. It introduces competitive general equilibrium theory, looking at the new urban economics, which is essentially competitive general equilib...

Urban economic models should raise the quality of debate about planning at the metropolitan level. Now research shows how this can be done.

This paper analyzes a model of early morning traffic congestion, that is a special case of the model considered in Newell (1988). A fixed number of identical vehicles travel along a single-lane road of constant width from a common origin to a common destination, with LWR flow congestion and Greenshields’ Relation. Vehicles have a common work start...

Consider a traffic corridor that connects a continuum of residential locations to a point central business district, and that is subject to flow congestion. The population density function along the corridor is exogenous, and except for location vehicles are identical. All vehicles travel along the corridor from home to work in the morning rush hou...

In the standard economic models of traffic congestion, traffic flow does not fall under heavily congested conditions. But this is counter to experience, especially in thedowntown areas of most major cities during rush hour. This paper presents a bathtub model of traffic congestion. The height of water in the bathtub corresponds totraffic density, v...

Through an extended numerical example, this paper develops a diagrammatic analysis of steady-state parking and traffic congestion in an isotropic downtown. The model incorporates curbside parking, garage parking, and price-sensitive travel demand in a unified setting, and provides systematic policy analysis. In particular, we examine the deadweight...

This paper investigates first-best downtown transportation systems in the medium run for a broad range of demand densities. A downtown transportation system is assumed to include a subway system that operates on its own network and a congestible street system that accommodates both buses and cars. A “subway†is any mass transit mode that opera...

Consider a transport facility in steady state that is operating at maximum throughput. How does it respond to a once-and-for-all increase in demand? The trip price must increase to ration the increased demand, but how? These questions have been the subject of a debate in transport economic theory dating back to Walters’ classic paper (1961). The cu...

Arnott and Inci [Arnott, R. and Inci, E., 2006. An integrated model of downtown parking and traffic congestion. Journal of Urban Economics 60, 418–442] developed an integrated model of curbside parking and traffic congestion in a downtown area. Curbside parking is exogenously priced below its social opportunity cost, and the stock of cars cruising...

Consider a transport facility in steady state that is operating at maximum throughput. How does it respond to a once-and-for-all increase in demand? The trip price must increase to ration the increased demand, but how? These questions have been the subject of a debate in transport economic theory dating back to Walters' classic paper (1961). The cu...

The bulk of the literature on retail location looks at the topic from the perspective of either the retail firm or the individual shopper. Another branch of the literature examines the spatial distribution of retail activities within a city or region, drawing on either central place theory or the Lowry model, neither of which incorporates either ma...

Space matters not only by inducing transport costs but also by mitigating pollution damages. Previous models of pollution either disregard space altogether or presume a predetermined separation between polluters and pollutees. In our model, workers commute to factories and all possible location combinations of housing and industry around a circle a...

‘Congestion’ is the phenomenon whereby the quality of service provided by a congestible facility degrades as its aggregate usage increases, when its capacity is held fixed. Here, the economic theory of congestion is developed in the context of road traffic. The primary questions of interest are how the capacity of a congestible facility and its usa...

En la UE se ha estimado que los costes de la congesti�n representan el 2% de su PIB y que el coste de la poluci�n del aire y ruido supera el 0,6% del PIB, siendo alrededor del 90% de los mismos ocasionados por el transporte terrestre. Ante este hecho y el continuo aumento de la demanda del transporte privado frente al p�blico para los desplazamient...

Under tenancy rent control, rents are regulated within a tenancy but not between tenancies. This paper investigates the effects of tenancy rent control on housing quality, maintenance, and rehabilitation. Since the discounted revenue received over a fixed-duration tenancy depends only on the starting rent, intuitively the landlord has an incentive...

In 2000, the average driver in US metropolitan areas endured 27 hours of traffic delays, a rise from 7 hours in 1980. In many other countries, traffic delays are considerably worse than in the United States, and in developing countries urban traffic congestion is increasing with alarming rapidity. For fifty years, economists have been advocating co...

This paper looks at optimal parking policy in dense urban districts (“downtown”), where spatial competition between parking garages is a key feature, from the perspective of economic theory. The paper has four parts. The first looks at the “parking garage operator's problem”. The second derives equilibrium in the parking garage market when there is...

Consider an atomistic developer who decides when and at what density to develop his land, under a property value tax system characterized by three time-invariant tax rates: τ V , the tax rate on pre-development land value; τ S , the tax rate on post-development residual site value; and τ K , the tax rate on structure value. Arnott (2005) identified...

DIFFERENT FACETS OF THE property taxation policy debate move in and out of focus according to current policy concerns and academic interests. Recently, the property tax has been discussed as a factor contributing to suburban sprawl, exclusionary zoning, the current crisis of housing affordability in coastal U.S. metropolitan areas, and housing mark...

This paper is the first to look at cruising for parking from an economic perspective. We present a downtown parking model that integrates traffic congestion and saturated on-street parking; the stock of cars cruising for parking adds to traffic congestion. Two major results emerge from the model, one of which is robust. The robust one is that, whet...

A major difficulty in implementing land/site value taxation is imputing the land value of built-on sites. The literature has focused on two alternatives. The first, residual site value, measures postdevelopment site value as property value less structure value, with structure value measured as depreciated construction costs. Residual site value wou...

The spatial distribution of economic activity is determined by a balancing of increasing and decreasing returns to scale activities. The Henry George Theorem states roughly that, if economic activity is efficiently organized over a "large" space, aggregate land rents equal the aggregate losses from the decreasing returns to scale activities. Kanemo...

We contrast equilibrium and welfare analysis in the rental housing market under two property rights regimes – eviction rights and security of tenure – when tenants face moving costs. A tenant’s idiosyncratic benefit from his unit and a landlord’s idiosyncratic profit from conversion are treated as private information. The two regimes differ when a...

This paper is concerned with the application of microeconomic theory to resource allocation in the transportation sector. The basic questions it addresses are how transportation should be priced and how capacity should be determined. Three models, the traditional highway pricing and investment model, the highway bottleneck model, and the traditiona...

This paper discusses uniqueness and efficiency of user equilibrium in trans- portation networks with heterogeneous commuters. Daganzo (1983, Trans- portation Science) proved the uniqueness of (stochastic) user equilibrium when commuters have heterogeneous tastes over possible paths but iden- tical disutility functions from time costs. We first show...

Existing theory suggests that, in an unregulated market for corporate control, the level of takeovers is suboptimal because shareholders do not receive the full benefit from them. However, existing theory neglects that the threat of takeover may divert managerial effort from productive to defensive activities. This paper shows that, when this is co...

En la UE se ha estimado que los costes de la congesti�n representan el 2% de su PIB y que el coste de la poluci�n del aire y ruido supera el 0,6% del PIB, siendo alrededor del 90% de los mismos ocasionados por el transporte terrestre. Ante este hecho y el continuo aumento de la demanda del transporte privado frente al p�blico para los desplazamient...

This paper considers the use of [`]long-run cost functions' for congested networks in solving second-best network problems, in which capacity and tolls are instruments. We derive analytical results both for general cost and demand functions and for specific functional forms, namely Bureau of Public Roads cost functions and constant-elasticity deman...

Consider a corridor which connects a continuum of residential locations to the CBD (central business district) and which is subject to flow congestion. All (identical) individuals travel along the corridor from home to work in the morning rush hour and have the same work start time. Each individual decides when to depart from home so as to minimize...

En la UE se ha estimado que los costes de la congesti�n representan el 2% de su PIB y que el coste de la poluci�n del aire y ruido supera el 0,6% del PIB, siendo alrededor del 90% de los mismos ocasionados por el transporte terrestre. Ante este hecho y el continuo aumento de la demanda del transporte privado frente al p�blico para los desplazamient...

In the discursive literature on rent control, it has been argued that rent controls cause the rental housing market to become ‘tighter’– the vacancy rate falls, search costs rise, and tenants become less well-matched with housing units – but at the same time restrict landlords’ ability to exploit their market power in setting rents. Such phenomena...

We derive declining exponential rent and density functions for a monocentric city from a new set of assumptions, which place restrictions on commuting costs rather than on the demand for land. The utility function is Cobb-Douglas with unrestricted income expenditure shares for land and for the numeraire good. The marginal commuting cost is assumed...

This paper examines the properties of stationary-state general equilibrium in a monocentric city with durable housing. On the demand side, identical households choose location, housing quality and quantity (floor area), and other goods. On the supply side, developers choose the structural density and time path of quality (which depends on construct...

This paper presents a simple model of parking congestion focusing on drivers' search for a vacant parking space in a spatially homogeneous metropolis. The mean density of vacant parking spaces is endogenous. A parking externality arises because individuals neglect the effect of their parking on this mean density. We examine stochastic stationary-st...

Urban structure is increasingly characterized by decentralization, dispersion, and multiple employment centers. Much is known empirically about such patterns, and about how the interplay between agglomerative and dispersive forces generates spatial structures that are complex and prone to multiple equilibria and dynamic path-dependence. These force...

Contributions to Public Policy Bill Vickrey’s cast of mind was that of a theorist. His interests, however, lay in public policy. This combination of traits-- in addition to genius-- resulted in his producing a magnificent body of research in applied economic theory, but at the same time in his having only limited success in the public policy arena....

There are constraints on pricing congestible facilities. First, if heterogeneous users are observationally indistinguishable, then congestion charges must be anonymous. Second, the time variation of congestion charges may be constrained. Do these constraints undermine the feasibility of marginal cost pricing, and hence the applicability of the firs...

The spatial mismatch hypothesis is that "Serious limitations on black residential choice, combined with the steady dispersal of jobs from central cities, are responsible for the low rates of employment and low earnings of Afro-American workers" (Kain, 1994, p. 371). Despite a wealth of related empirical studies, there has been little work formalisi...

According to the standard model of urban traffic congestion and urban spatial structure, congestion tolling results in a more concentrated city. In recent years, a new model of rush hour urban auto congestion has been developed which incorporates trip-timing decisions: the bottleneck model. In the simplest bottleneck model, optimal congestion tolli...

Overview of life and numerous contributions of William S. Vickrey (1914–1996), recipient of the Nobel Price in Economics in 1996.

The seminal paper in the modern literature on filtering is Sweeney, 1974b. Sweeney assumed that housing deteriorates in quality as it ages, no matter how much is spent on maintenance, and is eventually abandoned. This assumption appears to be inconsistent with the observation that, in European and eastern North American cities, expenditures on hous...

The paper investigates the effects of an income tax, a property tax, and a housing allowance in the Chicago Prototype Housing Market Model (CPHMM), a dynamic, perfect foresight simulation model of the housing market with a size—quality hierarchy and with multiple household groups. The income tax discriminates against housing conversions with large...

This paper analyzes the effects of information on participation and time-of-use decisions for a facility subject to queueing congestion when there are predictable and unpredictable fluctuations in capacity and demand. With constant elasticity demand and schedule delay cost functions, expected social surplus is greater with perfect than with imperfe...

Arnott and Stiglitz (1993) have argued that, in competitive insurance markets with moral hazard, equilibrium may entail firms offering latent policies-- policies that are not bought in equilibrium but are kept in place to deter entry. This paper provides an extended example of such an equilibrium, which not only proves that latent policies can be p...

In a first-best environment, taxi travel should be subsidized. The result derives from economies of density—doubling trips and taxis reduces waiting time. The subsidy should cover the shadow cost of taxis' idle time, evaluated at the optimum. The paper provides a proof of the result for dispatch taxis and then discusses the practicality of its impl...

The authors investigate the effect of information on users' participation decisions at a free-access congestible facility that is subject to unpredictable fluctuations in capacity and demand. With demand isoelastic in user cost and user cost isoelastic in the ratio of demand to capacity, optimal design capacity is larger with mean-preserving spread...

When the automobile was developed near the beginning of the last century, it was the relatively new fuel gasoline, not the familiar ethanol that became the fuel of choice. We examine the intersections of the early development of the automobile and the petroleum industry and consider the state of the agriculture sector during the same period. Throug...

Is an economy with adverse selection, moral hazard, or an incomplete set of risk markets ‘constrained’ Pareto efficient? There are two sets of papers addressing this question, one asserting that, under seemingly quite general conditions, the economy is constrained Pareto efficient, the other (to which we have contributed) that it is not. In this pa...

Many people in North America believe that prevailing commission rates for residential real estate brokers are too high, even though such beliefs are not based on a formal model. This paper presents a general equilibrium model of the housing market in which real estate brokers serve as matching intermediaries. We use this model to construct an illus...

This paper presents a filtering model of the housing market which is similar to Sweeney's (1974b), except that the maintenance technology is such that housing can be maintained at a constant quality level as well as downgraded, and population at each income level grows continuously over time. In equilibrium, at each moment of time, some housing is...

Economists' traditional hostility to rent contols is based on models that treat the housing market as perfectly competitive and on the experience with 'hard' controls in New York City and many European countries following World War II. The current 'soft' rent control systems in North America are varied and qualitatively different from earlier hard...

Many economic models can be formulated as a system of nonlinear equations and solved numerically using a black-box equation solver found in software packages such as EUREKA or MATHEMATICA. Unfortunately, black-box solvers can fail for several reasons and the messages displayed upon termination may not be very informative. In this paper we discuss a...

This paper considers the use of [`]long-run cost functions' for congested networks in solving second-best network problems, in which capacity and tolls are instruments. We derive analytical results both for general cost and demand functions and for specific functional forms, namely Bureau of Public Roads cost functions and constant-elasticity deman...

This paper examines the economics of residential real estate brokerage. Section 2 discusses the role of the residential real estate agent - what the listing agent does, what the selling agent does, and broadly how the residential real estate brokerage market is organized. Section 3 examines residential real estate broderage from an industrial organ...

The Chicago Prototype Housing Market Model is a policy-oriented dynamic- equilibrium simulation model of a metropolitan housing market. In an earlier article (Anas and Arnott 1993b), the model's structure and its calibration for Chicago were described. In this article we report on the effects of demand-side and supply-side policies in Chicago, Hous...

Recent success in introducing road pricing, as well as recent polls suggest that road pricing schemes are politically viable if a large majority of drivers benefit. In this paper we analyze the welfare effects of an optimal time-varying toll impose during the morning commute. The toll tends to benefit drivers with high unit values of travel time an...

This article addresses the practicability of introducing various traffic congestion alleviation schemes. Previous policies to counter traffic congestion have proved to be either unpopular, expensive or ineffective. The authors illustrate, by ways of economic and transport models, the current paradoxes of increased road provision leading to counter-...

We investigate the effect of information on participation and time of use decisions in a free access congestible facility subject to fluctuations in capacity and demand. Expected welfare is greater with perfect than with zero information, while optimal design capacity is greater if and only if demand elasticity is greater than one. Imperfect inform...

In this paper we investigate the descriptive and normative properties of competitive equilibrium with moral hazard when forms offer "price contracts" which allow clients to purchase as much insurance as they wish to at the quoted price. We show that a price equilibrium always exists and is one of three types i.) Zero-profit price equilibrium- zero...

This paper considers the use of [`]long-run cost functions' for congested networks in solving second-best network problems, in which capacity and tolls are instruments. We derive analytical results both for general cost and demand functions and for specific functional forms, namely Bureau of Public Roads cost functions and constant-elasticity deman...

In all familiar housing market models, a drop in construction costs expands the housing stock and lowers rent. This letter presents an alternative model in which a fall in construction costs can raise housing rents. The mechanism is as follows. A fall in construction costs relative to maintenance costs shortens building life; with fixed land and fi...

En la UE se ha estimado que los costes de la congesti�n representan el 2% de su PIB y que el coste de la poluci�n del aire y ruido supera el 0,6% del PIB, siendo alrededor del 90% de los mismos ocasionados por el transporte terrestre. Ante este hecho y el continuo aumento de la demanda del transporte privado frente al p�blico para los desplazamient...

Contrary to assertions in the literature, a positive relationship between parental wealth and children's attention to their parents does not provide persuasive evidence that children's attention is bequest-motivated. Nor does a negative relationship indicate that children's attention derives from filial altruism.

A stationary-state perfect foresight model is developed in which housing and land are treated as investment assets convertible to each other at some costs. Investors hold either land or housing and are heterogeneous in the i. i. d idiosyncratic shocks to their conversion costs in every time period. Hence, there are endogenously determined probabili...

This paper considers the modeling of road congestion subject to peak-load demand. The standard model contains ambiguities and is poorly specified. These problems can be eliminated by working with a structural model that explicitly treats the congestion technology and drivers' behavioral decisions. The paper provides a detailed analysis of a particu...

In a first-best environment, taxi travel should be subsidized. The result derives from economies of scale to taxi density--doubling trips and taxis reduces waiting time. The subsidy should cover the shadow cost of taxis' idle time at the optimum.

This paper examines the structure of long-term employment contracts when labor is mobile and risk averse, employers are unable to monitor workers' outside job offers, workers cannot borrow against future income, and workers' productivity is increasing in the length of service with the long-term employer. Workers are then liquidity constrained, and...

This paper focuses on the interaction between two aspects of road transportation previously considered only separately - user heterogeneity and route choice. The model, which treats two groups and two parallel routes, is static, though it includes as a special case the reduced form of Vickrey's dynamic bottleneck model. In equilibrium groups may tr...

D. Braess and others have shown that creating a new link in a congested network, or adding capacity to an existing link, can raise total travel costs if drivers switch routes. Here we show that a paradox can also result when routes are fixed, but users choose when to travel. As is true of the Braess paradox, the paradox here arises when the ineffic...

We investigate the effect of information about congestion on participation and time-of-use decisions in a free-access delay system subject to predictable and unpredictable fluctuations in capacity and demand intensity. Expected welfare is greater with perfect than with zero information, while optimal design capacity is greater if and only if demand...

Most work on the theory of moral hazard in the context of insurance investigates the properties of the schedule relating the net insurance payout to the accident damage in a partial equilibrium context. This paper reviews some results from a long-term research project undertaken by Joseph Stiglitz and the author, which in contrast focuses on moral...