A model of modal choice with heterogenous agents

Abstract

We build up a model where a mass of heterogenous commuters has to choose between public transportation and the car. Our main assumption comes from cross modal externalities: depending on the policy implemented, the congestion generated by car affects the quality of public transportation. We show that such a model can lead to multiple equilibria, and that the equilibrium involving the largest use of public transportation is always Pareto-enhancing. We discuss two policy tools: tax and separation of public transportation from car congestion. We show that, when one of the two is not strictly more efficient than the other, then separation should be preferred for large-scale policies, while taxation should be preferred for marginal modifications of commuting patterns.