Right of Way and Congestion Toll

This paper is concerned with the economics of reserved right of way, i.e. assigning separate facilities (roads or lanes within roads) to automobiles and buses in congested urban areas. The discussion of this issue appears frequently in conjunction with second-best considerations. The reserved right of way is judged as a device for changing the relative attractiveness of mass transportation vis-à-vis the automobile, when the warranted congestion toll is not levied (see Vickrey, 1963). We show in this paper that assigning different facilities (roads or lanes) may be optimal both when a congestion toll is charged from automobile drivers (hereafter ‘first-best’) and when no such toll is charged (hereafter ‘second-best’).