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The Economics of Car-Pooling: A Survey for Europe Matteo Maria Galizzi University of York and University of Insubria Workshop on Highways: Costs and Regulation.

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Presentation on theme: "The Economics of Car-Pooling: A Survey for Europe Matteo Maria Galizzi University of York and University of Insubria Workshop on Highways: Costs and Regulation."— Presentation transcript:

1 The Economics of Car-Pooling: A Survey for Europe Matteo Maria Galizzi University of York and University of Insubria Workshop on Highways: Costs and Regulation in Europe Bergamo, 26-27th November 2004

2 Economics meets common sense Preliminary contribution for an urgent real need Everybody would agree on that… Traffic congestion in Europe is a dramatic emergency But, can economists say something more? E.g. how dramatic is congestion in Europe?

3 European Commission estimates that in EU 80 % of all personal journeys are by car, between 1975 and 1995, the daily distance travelled per person doubled, a further doubling is predicted by 2025, 3 million additional cars on EU roads every year every day 7500 kilometres of European roads are blocked by traffic jams, the average traffic speed in European cities is estimated only 15km/h, roads congestion in Europe costs 130 billion euro per year

4 If this is not enough, also … The transport sector is responsible for 28 % of EU emissions of carbon dioxide, the bulk of this amount, 84 % comes from road vehicles, CO2 emissions from traffic are rising! In 2010 they are likely to be 50 % higher than in 1990 (the EU Kyoto target is reducing gas emissions by 8 % by then), congestion adds 6 % to the EU fuel bill, with a corresponding rise in pollution, the total social costs of traffic are estimated at 270 billion euro per year, around 4% of Europe's GDP.

5 Finally, the most horrifying: EU Commission Transport Division estimates that Roads conditions, in particular congestion, are found to be an explanatory co-factor of 1/3 of all the car accidents, More than 40,000 people still die on the EU roads every year, an average of 112 people every day, The human and economic costs are unacceptable, In purely economic terms, road accidents cost the EU 2 % of its GDP every year.

6 Probably, less known that… Many estimates, at national and at European level, show that On average, on each moving car, there are only 1.2 passengers ! Then, if we can just increase the average from 1.2 to 1.5 people for each car… Number of vehicles would be immediately reduced by 20 % !

7 This is exactly the idea behind car-pooling car-pooling is the agreement of joining the use of a private car by several individuals having the same journey at mutually compatible times. usually referred to neighbours commuting together to close workplaces But also, bringing children to school, a trip to the city or to a shopping centre, travelling to a common destination for business, conferences or holidays.

8 Car-pooling versus car-sharing Car-pooling Group of people voluntarily join together for sharing the costs of some common journey. For the journeys are used cars owned by some of the participants to the pool. Car-sharing Public, business or non profit institution, owning some cars, sells a group of people the right to use them when needed. Effective use rather than ownership. Comparable to rent-a- car or leasing service.

9 Useful related concepts from traditional economic theory Externalities: by maximizing her own interest in a decentralized manner, each driver burdens the community of a social cost in terms of pollution and congestion. Public goods: game of voluntary contribution to decongestion has an equilibrium where the individual dominant strategy is not to pool but to free-ride on the roads eventually less congested. Coordination problem: equilibrium social outcome could be improved simply by coordinating individual actions on different, not necessarily dominated, choices.

10 However, all these concepts cannot explain a peculiarity of car-pooling: Here the socially optimal decision to car-pool implies also private savings! By economic theory, any rational self-interested homo economicus would opt for car-pooling. In fact, driving my own car causes not only negative externalities but also larger private costs for myself. Car-pooling is an example of externality with alignment between private and social costs

11 Car-pooling induces both social benefits… Lower social costs: Abating polluting emissions, and correlated environmental and health problems. Abating the number of circulating vehicles, congestion and waiting time in traffic jams. Decreasing the risk of car accidents. Curbing the need for new parking places and road infrastructures. Also behavioural indirect benefits challenge to cultural and social habits, less self- absorbed and autarchic views, more comprehensive and cooperative behaviour, greater awareness of social responsibility.

12 … and private benefits! Lower private costs… Participants share: the cost of fuel the tolls to access highways or city centres the cost of parking Less need for an extra car in the household Employers save too … but also indirect benefits : alternating driving over the day and the week Less tiredness and stress, Greater concentration, lower risk of car accidents, More friendly and talkative atmosphere, Better and less competitive working environment.

13 True question is: Why do not people car-pool, then? General rationality and cognition arguments. People are sometimes bounded rational, instinctive, myopic: computing optimal decisions can be difficult, frequent irrational choices, long- run less perceived than short-run. Force of habits. Rooted behaviour and mentality are difficult to bend to innovative ones. Attachment to private property. My own car is a safe extension of my sphere of influence. Feeling of freedom. Independence from anyone else, strongly emphasized also by advertisement. Coordination failure. Lack of centralized communication and matching between drivers with compatible needs.

14 Co-ordination failure, besides externalities, may justifiy public intervention. Directly or by funding other centralized subjects. Role of non profit organizations. Providing monetary or indirect incentives in adoption of car-pooling. Challenging force of habits. Centralizing the crucial process of matching between drivers with compatible needs in terms or routes and times.

15 Matching and its algorithms are crucial Help from Game Theory and Operational Research IRPUD Institute developed an OR simulation. Compile disaggregate data on 212,945 of work trips within, into and out of Dortmund. Select the matching algorithms using criteria such as minimum detour or waiting time. 2 work trips are poolable if residences and work places coincide, or are on the same route, and if departure times are not too different. 16 different scenarios on the max acceptable walking distance (500/1000m), the max acceptable adjustment of departure time (15/30). Results --> for a max walking distance of 1000m and a max waiting time of 30… 2/3 of all work trips are poolable, and 1/2 of Kms could be saved!

16 Experiments of car-pooling in Europe 3 main classes. 1.Car-pooling promoted by local authorities and public agencies, targeting all the citizens, (although from public employees), and often funded and coordinated by EU. 2.Car-pooling initiatives from institutions and companies for their own employees only. 3.Car-pooling projects, both business and non profit oriented, specially designed for occasional trips or long-distance travels. Tentatively estimated number of total users in Europe: about half a million

17 Successful car-pooling experiences in Europe I 1.Main local authorities and public agencies. EU CARPLUS project in Madrid, Rome, Paris/Les Ulis, Stuttgart and several cities of Switzerland (Zurich, St. Gall, Laax/Flims, Gstaad) with the collaboration of ICT companies and universities, The main Dutch cities: Utrecht 75% of all public employees are now car-pooling, Dublin with a capillary surveys at a suburb level the Swedish small villages and the Danish rural areas, Barcelona and the Generalitat de Catalunya, The recent experiments in Mantua, Rome, Venice- Mestre, Padua, Bologna and the Emilia region. Estimate by aggregation: 35000/150000 involved people.

18 (Most) Successful car-pooling experiences in Europe II 2. Employing insitutions and companies. 90 private companies in Brussels: one year after the car-pooling experiment the number of solo-drivers in the city has been declined by 5% the Belgian branch of Ford: only 30% of the employees is now commuting alone, the French branches of Nestlè and Ecover, Stockley Park Consortium Ltd, a business park close to London with 32 firms many British and Irish universities, Saab and Bang and Olufsen in Sweden, the Italian hospital Policlinico Umberto I in Rome: 185 car-pools out of 5212 employees. Estimate : 250000/300000 involved employees

19 Successful car-pooling experiences in Europe III 3. Business and non profit services for occasional trips and travels. Most based on free internet access and on-line database. The main two are in Germany and in France, with thousands of in Belgium, with about 100 business users, and in France (100 people), in Great Britain, in Switzerland, the only one with a membership fee, at 25 Swiss francs a year, in German cities (Stuttgart) Estimate : about 40000 involved people

20 Main critical success factors I Large number of individuals. Potential participants living in close neighbourhoods. Commuting distance and time not too short. Persons with more than 5 km to work are the most interested. Yearly driving not too small. Only 5% of those driving less than 10,000 km per year are interested in car pooling. But of those driving more than 30,000 km per year 35% are interested. Working times fixed or easily predictable. Spouses variable working hours: interest for car- pooling increases because the spouse can then have access to the household's car. Number of driving licences in the family. No correlation between interest for car pooling and the number and age of cars in the household.

21 Main critical success factors II Starting from workplaces. Not only as matching tends to be much easier, but specially because... Personal knowledge, human behaviour and trust really matter! –Fear of, or suspect for, unknown people (e.g. UK police). –Car insurance. –Behavioural idiosyncrasies. –Personal views about punctuality, safety, chatting, speeding up –or to smoking or listening radio in the car. Free negotiation of costs sharing. Almost all the actions in Europe leave participants completely free to negotiate how to share costs. Unique exception is Swiss agency which recommends 0.1 to 0.2 Swiss franc for any passenger/kilometre. Barter economy. Most the private cost-sharing agreements involve no money transactions at all. Rather, alternating turns of driving and taking the car.

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