When Efficiency meets Equity in Congestion Pricing and Revenue Refunding Schemes
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Congestion pricing has long been hailed as a means to mitigate traffic congestion; however, its practical adoption has been limited due to the resulting social inequity issue, e.g., low-income users are priced out off certain roads. This issue has spurred interest in the design of equitable mechanisms that aim to refund the collected toll revenues as lump-sum transfers to users. Although revenue refunding has been extensively studied, there has been no thorough characterization of how such schemes can be designed to simultaneously achieve system efficiency and equity objectives. In this work, we bridge this gap through the study of congestion pricing and revenue refunding (CPRR) schemes in non-atomic congestion games. We first develop CPRR schemes, which in comparison to the untolled case, simultaneously (i) increase system efficiency and (ii) decrease wealth inequality, while being (iii) user-favorable: irrespective of their initial wealth or values-of-time (which may differ across users) users would experience a lower travel cost after the implementation of the proposed scheme. We then characterize the set of optimal user-favorable CPRR schemes that simultaneously maximize system efficiency and minimize wealth inequality. These results assume a well-studied behavior model of users minimizing a linear function of their travel times and tolls, without considering refunds. We also study a more complex behavior model wherein users are influenced by and react to the amount of refund that they receive. Although, in general, the two models can result in different outcomes in terms of system efficiency and wealth inequality, we establish that those outcomes coincide when the aforementioned optimal CPRR scheme is implemented. Overall, our work demonstrates that through appropriate refunding policies we can achieve system efficiency while reducing wealth inequality.
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