It is pos­si­ble to in­crease traf­fic and ex­pe­ri­ence shorter travel times un­der au­to­ma­tion.

Rotman Management Magazine - - FROM THE EDITOR -

Our anal­y­sis showed that sub­si­diza­tion (Pol­icy 1) al­ways leads to higher so­cial wel­fare than ‘tax-and-sub­si­dize’ (Pol­icy 2). Nev­er­the­less, a higher level of au­to­ma­tion would be achieved by the lat­ter, and this could lead to im­por­tant sec­ondary ben­e­fits — such as a re­duc­tion in ac­ci­dents and en­vi­ron­men­tal pol­lu­tion.

We also found that the op­ti­mal pol­icy will de­pend on the mar­ket price of AVS and the abil­ity of the in­dus­try’s in­fra­struc­ture to ser­vice them. Hence, the idea of an ‘op­ti­mal’ pol­icy will change as AVS be­come more af­ford­able and the in­fra­struc­ture is up­graded to bet­ter serve them over time. For in­stance, al­ter­ing shar­ing ar­range­ments (Pol­icy 3) would not be an ideal ap­proach when AVS first en­ter the mar­ket be­cause the mar­ket-share would not be large enough to ex­ploit the ben­e­fits of shar­ing; but, as the mar­ket share grows and the in­fra­struc­ture evolves, this pol­icy be­comes in­creas­ingly pow­er­ful.

Some of our in­sights might ap­pear to be counter-in­tu­itive. First, it is com­monly ac­cepted that ‘any in­crease in traf­fic will lead to longer travel times’. How­ever, we found that this may not be the case when there is a mix of reg­u­lar ve­hi­cles and AVS on the road. Put sim­ply, it is pos­si­ble to in­crease traf­fic and ex­pe­ri­ence shorter travel times un­der au­to­ma­tion. Sec­ond, since AV users will ex­pe­ri­ence more free time and com­fort when trav­el­ling, the in­duced traf­fic in the net­work may in­crease. There­fore, as the level of com­fort in­creases (and the value of time de­creases), au­to­ma­tion be­comes more harm­ful to so­cial wel­fare. This counter-in­tu­itive as­ser­tion re­sults from the pre­dicted ten­dency of AV own­ers to travel more be­cause of the ex­tra com­fort af­forded by th­ese ve­hi­cles.

While AVS are ex­pected to ben­e­fit so­ci­ety in many ways, their high ini­tial cost may hin­der their wide­spread adop­tion. There­fore we be­lieve gov­ern­ment in­ter­ven­tion is re­quired to en­sure that AVS are af­ford­able for the pub­lic. Poli­cies that en­dorse au­to­ma­tion may use sub­si­diza­tion, tax­a­tion or the pro­mo­tion of ve­hi­cle shar­ing be­tween mul­ti­ple users.

The op­ti­mal pol­icy for AVS de­pends on the price gap be­tween au­ton­o­mous and reg­u­lar ve­hi­cles, and the abil­ity of an area’s in­fra­struc­ture to ser­vice AVS. There­fore, the op­ti­mal pol­icy will change with time, as in­fra­struc­ture is im­proved and AVS be­come more cost-ef­fec­tive due to mass pro­duc­tion.

In clos­ing

Many forth­com­ing poli­cies in the realm of ve­hi­cle au­to­ma­tion re­main to be in­ves­ti­gated, in­clud­ing changes to traf­fic rules, taxi reg­u­la­tion and land use changes. Con­tin­ued re­search in th­ese ar­eas will al­low us to bet­ter com­pre­hend the fu­ture im­pact of ve­hi­cle au­to­ma­tion and pro­vide fur­ther tools for pol­i­cy­mak­ers to make ef­fec­tive de­ci­sions.

An im­por­tant next step is to in­ves­ti­gate the pric­ing struc­ture of house­holds in each group of ve­hi­cle shar­ers or ‘AV coali­tions’. For ex­am­ple, for joint own­ers of AVS, how should the own­er­ship costs be eq­ui­tably di­vided among the mem­bers of each coali­tion to reach an equi­lib­rium where no house­hold ben­e­fits from switch­ing to an­other coali­tion?

In the mean­time, we hope that our anal­y­sis and the in­sights it gen­er­ates may sup­port gov­ern­ment agen­cies and other reg­u­la­tory bod­ies in their study and im­ple­men­ta­tion of poli­cies to op­ti­mally con­trol the adop­tion of AVS.

Opher Baron is a Pro­fes­sor of Op­er­a­tions Man­age­ment at the Rot­man School of Man­age­ment. Oded Ber­man is the Syd­ney C. Cooper Chair in Busi­ness and Technology at the Rot­man School. Me­hdi Nourine­jad is a Post-doc­toral Fel­low at the Rot­man School. They are the co-au­thors of “The Eco­nomics of Au­ton­o­mous Ve­hi­cles: For­mu­la­tion and Anal­y­sis of Op­ti­mal Poli­cies,” from which this ar­ti­cle has been ex­cerpted. Rot­man fac­ulty re­search is ranked in the top 10 world­wide by the Fi­nan­cial Times.

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