First-best dynamic assignment of commuters with endogenous heterogeneities in a corridor network

We study a parsimonious theory that synthesizes short-term traffic demand management (TDM) policies with long-term endogenous heterogeneities of demand. In a corridor network with multiple discrete bottlenecks, we study a model of system optimal assignment that integrates the short-term problem (departure time choice with tolling) and the long-term problem (job and residential location choice). For the short-term departure-time-choice equilibrium, under mild assumptions on schedule delay function, we derive analytical solutions under a first-best TDM scheme. Investigating properties of long-term equilibria, we found that the overall equilibrium pattern exhibits remarkable spatio-temporal sorting properties. It is further shown that a lack of integration of the short- and the long-term policy results in excessive investments for long-term road construction.