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Many of the factors affecting traffic jams are a result of human drivers. This animation demonstrates two causes of traffic jams - 'waves' and zip merging:


I think it is rather easy to see how a central algorithm would be much better at a) maintaining a safe distance from the car in front, and b) merging quickly and fairly.

Route selection is just one of the things an algorithm could do.

Traffic, by Tom Vanderbilt, has many interesting things to say on the subject: http://www.amazon.com/Traffic-Drive-What-Says-About/dp/03072...

Also, the 'safe distance from the car in front' could be dramatically decreased. Reaction times of computers are way lower than those of humans, and also less variable. A car could signal that it is going to brake to a car following it with a meter of space between them, and brake a ms later, trusting the following car to do follow its speed decrease.

Lower inter-car distance on highways will also mean lower air resistance, and hence, higher mpg.

I doubt that the net effect on fuel consumption will be substantial, though. Chances are that people will want their driverless cars to drive faster, so that they can live farther away from work. IMO, the only thing that will help there is pricing (fuel, road use, etc)

should be a good read, thanks!

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