Bottleneck Congestion with Elastic Demand

This paper models congestable facilities subject to peak-load demand. It argues that a properly-specified model should explicitly treat the congestion technology and consumer's time-of-use decision. The standard model can be interpreted as a reduced form of such a model if the peak period is treated as a single interval, but not if it is divided into sub-intervals. The paper illustrates this, by extending Vickrey's model of bottleneck congestion, treating elastic demand and solving for optimal capacity under several pricing regimes.