# 12-137/VIII (2012-12-10)

Sergejs Gubins, VU University Amsterdam; Erik T. Verhoef, VU University Amsterdam
dynamic traffic congestion, urban equilibrium, road pricing, bottleneck model, monocentric model
JEL codes:
D62, R21, R41, R48

We consider a monocentric city where a traffic bottleneck is located at the entrance of the central business district. The commuters' choices of the departure times from home, residential location, and lot size, are all endogenous. We show that elimination of queuing time under optimal road pricing induces individuals to spend more time at home and to have larger houses, causing urban sprawl. This is opposite to the typical results of urban models with static congestion, which predict cities to become denser with road pricing.