Top

Transportation

Published in:

01-05-2013

Road pricing with complications

Authors: Mogens Fosgerau, Kurt Van Dender

Published in: Transportation | Issue 3/2013

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

The rationale for congestion charges is that by internalising the marginal external congestion cost, they restore efficiency in the transport market. In the canonical model underlying this view, congestion is a static phenomenon, users are taken to be homogenous, there is no travel time risk, and a highly stylised model of congestion is used. The simple analysis also ignores that real pricing schemes are only rough approximations to ideal systems and that inefficiencies in related markets potentially affect the case for congestion charges. The canonical model tends to understate the marginal external congestion cost because it ignores user heterogeneity and trip timing inefficiencies. With respect to the relevance of interactions between congestion and congestion charges and tax distortions and distributional concerns, recent insights point out that there is no general case for modifying charges for such interactions. Therefore the simple Pigouvian rule remains a good first approximation for the design of road charging systems.

next article Behavioural implications of preferences, risk attitudes and beliefs in modelling risky travel choice with travel time variability

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Technik"

Online-Abonnement

Mit Springer Professional "Technik" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 390 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Maschinenbau + Werkstoffe

Jetzt Wissensvorsprung sichern!

inform now

This is true in a first-best world, where all other prices equal marginal social cost.

This is also true in a first-best world.

Net benefits also depend on implementation costs. We do not discuss those in this paper, but emerging evidence suggests these costs are high—if the main issue is to raise revenue then cheaper ways of doing so exist (OECD 2010).

Other monetary travel costs are ignored.

De Palma and Fosgerau (2011) develops the bottleneck model under more general scheduling preferences.

A recent paper (Cassidy et al. 2010) indicates that special lanes such as car pool lanes can increase effective road capacity, because they reduce disruptive vehicle lane changing. Even a severely underused carpool lane can in some instances increase a freeway bottleneck's total discharge flow. A theoretical investigation of these issues is undertaken in Menendez and Daganzo (2007).

This may sound easier than it is. Fosgerau (2006) discusses issues related to the identification of the distribution of VTT. De Borger and Fosgerau (2008) discuss extensions to take behavioral anomalies into account.

The estimate is computed using a nonparametric technique, which does not impose the restriction that the cumulative distribution should be increasing. It is therefore evidence of the internal validity of the SP data that an increasing function does result.

Arnott et al. (1994), discuss pricing with heterogeneous travellers in the context of the bottleneck model. Arnott and Kraus (1998) discuss marginal cost pricing when travellers are heterogeneous but the differences are not observed.

This could be regarded as a case of product differentiation (Mas-Colell et al. 1995), since the outcome is that the parts of the road deliver different travel times. In contrast to most goods, the service quality of roads depends strongly on usage.

This pattern is generated by the random capacity bottleneck model for any distribution of capacity (Fosgerau 2010).

The scale or statistical dispersion of a distribution indicates how “spread out” it is. .

Previously, this had been shown for some special cases (Noland and Small 1995; Bates et al. 2001).

Travel times are not likely to be independent since delays on different links may have common causes. Still, additivity must be considered an improvement over no additivity.

There are cases where equilibrium effects imply that imperfect information is not necessarily welfare improving (Arnott et al. 1999).

Or whatever turns out to be the optimal charge.

Perhaps with allowance for imperfections in the wider economy.

In contrast to the Kaplow approach, the Kaldor–Hicks argument does not require a social welfare function. But as no social welfare function would reject a Pareto-improvement, the views are consistent.

We criticized the same paper in the previous section for its reliance on income tax restrictions that strongly affect results. That issue is separate from the consideration of the general modelling strategy considered here. Whether the complex rule is correct or not is obviously important, but here the question is whether the complexity itself is worthwhile.

The evolving insight on the relevance of other distortions, discussed in Sect. 7.2, and the conceptual and empirical uncertainty on the size and nature of agglomeration economies can serve as examples.

Richard Arnott (1998) distinguishes between model-based and model-assisted reasoning, where the latter refers to the use of models to illuminate a broader argument, and the former is where the model is the argument.

Engelson et al. (2012) compare the models METROPOLIS (de Palma et al. 1997) and SILVESTER (Kristoffersson and Engelson 2009) in an ex post study of the Stockholm congestion charge. METROPOLIS handles dynamics, trip timing and heterogeneity, while SILVESTER also goes some way to take travel time variability into account. Both models provide significant improvement in realism over static models.

Arnott, R.: William Vickrey: contributions to public policy. Int. Tax Public Finance 5, 93–113 (1998)CrossRef

Arnott, R., Kraus, M.: When are anonymous congestion charges consistent with marginal cost pricing? J. Public Econ. 67, 45–64 (1998)CrossRef

Arnott, R.A., de Palma, A., Lindsey, R.: A structural model of peak-period congestion: a traffic bottleneck with elastic demand. Am. Econ. Rev. 83, 161–179 (1993)

Arnott, R.A., de Palma, A., Lindsey, R.: The welfare effects of congestion tolls with heterogeneous commuters. J. Transp. Econ. Policy 28, 139–161 (1994)

Arnott, R.A., de Palma, A., Lindsey, R.: Information and time-of-usage decisions in the bottleneck model with stochastic capacity and demand. Eur. Econ. Rev. 43, 525–548 (1999)CrossRef

Bates, J., Polak, J., Jones, P., Cook, A.: The valuation of reliability for personal travel. Transp. Res. Part E 37, 191–229 (2001)CrossRef

Calthrop, E., De Borger, B., Proost, S.: Cost-Benefit analysis of transport investments in distorted economies. Transp. Res. Part B 44, 850–869 (2010)CrossRef

Cassidy, M.J., Jang, K., Daganzo, C.F.: The smoothing effect of carpool lanes on freeway bottlenecks. Transp. Res. Part A 44, 65–75 (2010)

Corlett, W.J., Hague, D.C.: Complementarity and the excess burden of taxation. Rev. Econ. Stud. 21, 21–30 (1953)CrossRef

De Borger, B., Fosgerau, M.: The trade-off between money and time: a test of the theory of reference-dependent preferences. J. Urban Econ. 64, 101–115 (2008)CrossRef

De Borger, B., Proost, S.: Reforming Transport Pricing in the European Union: A Modelling Approach, Transport Economics, Management and Policy Series. Edward Elgar, Cheltenham (2001)

de Palma, A., Fosgerau, M.: Dynamic traffic modeling. In: de Palma, A., Lindsey, R., Quinet, E., Vickerman, R. (eds.) A Handbook of Transport Economics. Edward Elgar, Cheltenham (2011)

de Palma, A., Marchal, F., Nesterov, Y.: METROPOLIS: modular system for dynamic traffic simulation. Transp. Res. Rec. 1607, 178–184 (1997)CrossRef

Engelson, L., Kristoffersson, I., de Palma, A., Motamedi, K., Saifuzzaman, M.: Comparison of two dynamic transportation models: The case of Stockholm congestion charging. Presented at the 4th TRB conference on Innovations in Travel Modeling, Tampa (2012)

Fosgerau, M.: Investigating the distribution of the value of travel time savings. Transp. Res. Part B: Methodol. 40, 688–707 (2006)CrossRef

Fosgerau, M.: On the relation between the mean and variance of delay in dynamic queues with random capacity and demand. J. Econ. Dynam. Control 34, 598–603 (2010)CrossRef

Fosgerau, M.: How a fast lane may replace a congestion toll. Transp. Res. Part B 45, 845–851 (2011)CrossRef

Fosgerau, M., Engelson, L.: The value of travel time variance. Transp. Res. Part B: Methodol. 45, 1–8 (2011)CrossRef

Fosgerau, M., Karlstrom, A.: The value of reliability. Transp. Res. Part B 44, 38–49 (2010)CrossRef

Fosgerau, M., Pilegaard, N.: Cost-benefit rules for transport projects when labor supply is endogenous and taxes are distortionary. Munich Personal RePEc Archive 3902 (2007)

Fosgerau, M., Van Dender, K.: Road pricing with complications. OECD/ITF Joint Research Centre Discussion Papers 2010-2 (2010)

Geroliminis, N., Daganzo, C.F.: Existence of urban-scale macroscopic fundamental diagrams: some experimental findings. Transportation Research Part B: Methodological 42, 759–770 (2008)CrossRef

Graham, D., Van Dender, K.: Pricing congestion with heterogeneous agglomeration externalities and workers. mimeo (2009)

Kreiner, C.T., Verdelin, N.: Optimal provision of public goods: a synthesis*. Scand. J. Econ. 114, 384–408 (2012)CrossRef

Kristoffersson, I., Engelson, L.: A dynamic transportation model for the Stockholm area: implementation issues regarding departure time choice and od-pair reduction. Netw. Spatial Econ. 9, 551–573 (2009)CrossRef

Mas-Colell, A., Whinston, M., Green, J.: Microeconomic Theory. Oxford Press, Oxford (1995)

Menendez, M., Daganzo, C.F.: Effects of HOV lanes on freeway bottlenecks. Transp. Res. Part B 41, 809–822 (2007)CrossRef

Munk, K.J.: Rules of normalisation and their importance for interpretation of systems of optimal taxation (No. Working Paper 2006-13). School of Economics and Management, University of Aarhus (2006)

Noland, R.B., Small, K.A.: Travel-time uncertainty, departure time choice, and the cost of morning commutes. Transp. Res. Rec. 1493, 150–158 (1995)

OECD: Implementing Congestion Charging: Summary and Conclusions. OECD/ITF Joint Transport Research Centre Discussion Papers (2010)

Parry, I., Small, K.A.: Should urban transit subsidies be reduced? Am. Econ. Rev. 99, 700–724 (2009)CrossRef

Parry, I.W.H., Small, K.A.: Does Britain or the United States have the right gasoline tax? Am. Econ. Rev. 95, 1276–1289 (2005)CrossRef

Pilegaard, N., Fosgerau, M.: Cost-benefit analysis of a transport improvement in the case of search unemployment. J. Transp. Econ. Policy 42, 23–42 (2008)

Raux, C.: Comments on “The London congestion charge: a tentative economic appraisal”. Transp. Policy 12, 368–371 (2005)CrossRef

Safirova, E., Gillingham, K., Parry, I., Nelson, P., Harrington, W., Mason, D. Welfare and distributional effects of road pricing schemes for metropolitan Washington DC. In: Road Pricing: Theory and Evidence, Research in Transportation Economics. Elsevier JAI, Amsterdam, pp. 179–208 (2004)

Small, K.: The scheduling of consumer activities: work trips. Am. Econ. Rev 72, 467–479 (1982)

Small, K.A., Van Dender, K.. Long run trends in transport demand, fuel price elasticities and implications of the oil outlook for transport policy. ITF Discussion Paper 16 (2007)

Small, K.A., Verhoef, E.T.: Urban Transportation Economics. Routledge, London and New York (2007)

Small, K.A., Winston, C., Yan, J.: Uncovering the distribution of motorists’ preferences for travel time and reliability. Econometrica 73, 1367–1382 (2005)CrossRef

Small, K.A., Yan, J.: The value of value pricing’’ of roads: second-best pricing and product differentiation. J. Urban Econ. 49, 310–336 (2001)CrossRef

Sumalee, A., May, T., Shepherd, S.: Comparison of judgmental and optimal road pricing cordons. Transp. Policy 12, 384–390 (2005)CrossRef

Van Dender, K.: Transport taxes with multiple trip purposes. Scand. J. Econ. 105, 295–310 (2003)CrossRef

Verhoef, E.T.: Second-best congestion pricing in general networks: heuristic algorithms for finding second-best optimal toll levels and toll points. Transp. Res. Part B 36, 707–729 (2002)CrossRef

Verhoef, E.T., Small, K.A.: Product differentiation on roads: constrained congestion pricing with heterogeneous users. J. Transp. Econ. Policy 38, 127–156 (2004)

Vickrey, W.S.: Congestion theory and transport investment. Am. Econ. Rev. 59, 251–261 (1969)

Vickrey, W.S.: Pricing, metering, and efficiently using urban transportation facilities. Highway Res. Rec. 476, 36–48 (1973)

Zhu, X., Van Ommeren, J., Rietveld, P.: Indirect benefits of infrastructure improvement in the case of an imperfect labor market. Transp. Res. Part B 43, 57–72 (2009)CrossRef

Title: Road pricing with complications
Authors: Mogens Fosgerau
Kurt Van Dender
Publication date: 01-05-2013
Publisher: Springer US
Published in: Transportation / Issue 3/2013
Print ISSN: 0049-4488
Electronic ISSN: 1572-9435
DOI: https://doi.org/10.1007/s11116-012-9442-5

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Technik"

Other articles of this Issue 3/2013

A complex network approach to understand commercial vehicle movement

An empirical comparison of travel choice models that capture preferences for compromise alternatives

Reviewing the axial-line approach to capturing vehicular trip-makers’ route-choice decisions with ground reality

Estimation of a constrained multinomial logit model

A multi-criteria decision support methodology for implementing truck operation strategies

An aggregate approach to model evacuee behavior for no-notice evacuation operations

Premium Partner