Congestion Control and Vehicle Ownership Restriction: The Choice of an Optimal Quota Policy

Singapore introduced a vehicle quota system (VQS) in 1990 as part of its overall policy to control urban congestion. While the VQS has reduced the annual growth rate of the vehicle population to about 3%, it has created uncertainty in the cost of vehicle ownership due to the fluctuations in license prices. The paper discusses three issues relating to the optimal design of a VQS: license transferability, subcategorization and the choice of an auction format. Our analysis shows that license transferability is not unambiguously desirable, sub-categorization is highly regressive, and an open auction format results in less aggressive bidding and lower license prices.