Congestion Pricing, Carpooling, and Commuter Welfare

Building on the canonical “bottleneck” model of Vickrey (1969), we show that carpooling and road pricing are highly complementary in addressing traffic congestion: they can be much more effective jointly than each one separately, and can improve commuter welfare without having to rely on the redistribution of government revenue. By contrast, technological advances that make time in traffic more comfortable or productive (e.g., self-driving cars), implemented without additional economic incentives, may result in zero improvement in social welfare.