Bisection‐based trial‐and‐error implementation of marginal cost pricing and tradable credit scheme

The purpose of this paper is three fold: First, it demonstrates the non‐convergence of the bisection method proposed in the literature for the trial‐and‐error implementation of the marginal‐cost pricing in the absence of a demand function. Second, it provides a modified version of the bisection method and establishes its convergence. Third, it adapts the modified bisection method for the trial‐and‐error implementation of the tradable credit scheme proposed recently, which can emulate a congestion pricing system in a revenue‐neutral manner.