Characteristics of a common resource, Taxation

Suppose there are 40 commuters in Apple Valley, Minnesota who commute to downtown Minneapolis. They have two options for getting downtown: they can take the light rail or they can drive their own car. It takes 25 minutes to get downtown on the light rail, while the time it takes to drive depends on how many other commuters are on the road. Suppose the commute time is (5 + n) minutes where n is the number of commuters on the road (the only people who use the highway are the residents of Apple Valley). Assume workers care only about their commuting time, and the cost of driving is the same as the cost of light rail.

The highway during rush hour is a common resource. What are the two characteristics of a common resource?

Assume the commuters make their decisions about whether to drive or take the light rail independently. How many commuters do you expect to see on the road? What is the total commuting time for all 40 commuters combined in this equilibrium?

If only 10 commuters take the highway the total commuting time for all 40 commuters combined is 900 minutes. Why is this outcome most likely unsustainable if drivers make their decisions independently?

Posted Date: 3/25/2013 6:07:55 AM | Location : United States

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