Opher Baron, Oded Berman, and Mehdi Nourinejad, all of the University of Toronto School of Management, have published Introducing Autonomous Vehicles: Formulation and Analysis of Public Policies. Here is the abstract.
Problem definition: Autonomous vehicles are predicted to enter the consumer market in less than a decade. There is currently no consensus on whether their presence will have a positive impact on users and society. The skeptics of automation foresee increased congestion, whereas the advocates envision smoother traffic with shorter travel times. In this paper, we study the automation controversy and advise policymakers on how and when to promote autonomous vehicles. Academic/Practical Relevance: With recent advancements in vehicle automation, there is a need to study its impact on social welfare and consider the required policies to support the right level of automation. Methodology: We use supply-demand theory to find the equilibrium number of trips for autonomous and regular households. We capture sources of heterogeneity in the demand curve and in the purchase power of the households. We investigate the impact of policies that can support adequate usage of autonomous vehicles. Results: We establish that (i) a sound judgment of automation relies on the occurrence of three possible cases for which full, null, or partial automation is recommended; (ii) although traffic increases with automation, travel times decrease in the first two cases (the full or partial automation case) because of significant improvements in traffic flow caused by automation; and (iii) autonomous vehicle owners can engage in alternative activities (e.g., reading) while in the vehicle, hence they travel more than regular vehicle owners. We derive the offset in the number of trips of the two households for a specific exponential function. Managerial implications: We propose three policies based on subsidization, taxation-and-subsidization (under revenue neutrality), and vehicle-sharing. We show that subsidization provides the highest social welfare, whereas taxation-and-subsidization yields the highest level of automation. Moreover, the optimal policy may change with time as the infrastructure is upgraded to serve autonomous vehicles.
Download the article from SSRN at the link.