Abstract

This paper considers second-best pricing as it arises through incomplete coverage of full networks. The main principles are first reviewed by considering the classic two-route problem and some extensions that have been studied more recently. In most of these studies the competing routes are assumed to be perfect substitutes, which is probably not the case for most parallel roads in reality, and even less likely for the case where competing connections represent different transport modes. In this paper a modelling framework in which the alternatives are imperfect substitutes is developed and numerical results for two roads and two modes are presented. In the model, trip generation and trip distribution are distinguished in a way that is consistent with economic theory. The model is used to consider situations in which one route or mode cannot be tolled. Simulation results show that, for the chosen parameter values, there is a substantial difference between the effec! tiveness of policies in which the capacities have to be taken as given, and those in which capacity of at least one mode can be changed. A striking feature of the policy in which the capacities of both modes/routes and the railway fare/toll on one road can be used as policy instruments is the existence of two equilibria for a range of values of â. In one equilibrium there are substantial numbers of users of both modes, whereas in the other use of one mode is negligible

Abstract

This paper explores the interrelations between pricing, capacity choice and financingin transportation networks. It builds on the famous Mohring-Harwitz result on self-financing ofoptimally designed roads under optimal congestion pricing, and specifically investigates itsins and outs in a network environment and under various types of second-best regulation. Thepaper develops a small network model, with endogenous car-ownership, in order to study thesequestions both from an analytical and a numerical viewpoint. It is for instance shown thatapplication of the principle over an entire network may cause user prices to increase morestrongly in initially mildly congested areas compared to heavily congested areas, and that aflat kilometre charge, provided accompanied with optimal capacity policies, may result infirst-best efficiency gains.

Abstract

Paper submission from Erik Verhoef (everhoef@econ.vu.nl)Discussion Paper Submission Form - STEP 1This discussion paper abstract is submitted by Erik Verhoef (everhoef@econ.vu.nl)Template-Type: ReDIF-Paper 1.0Series: Tinbergen Institute Discussion PapersCreation-Date: Number: Author-Name: Erik T VerhoefAuthor-Email: everhoef@econ.vu.nlAuthor-Workplace-Name: VUTitle: SECOND-BEST CONGESTION PRICING SCHEMES IN THE MONOCENTRIC CITYAbstract:This paper considers second-best congestion pricing in the monocentric city, with endogenous residential density and endogenous labour supply. A spatial general equilibrium model is developed that allows consideration of the three-way interactions between urban density, traffic congestion and labour supply. Congestion pricing schemes are analyzed that are second-best ‘by design’ (and not because distortions exist elsewhere in the spatial economy), like cordon charging and flat kilometre charges. Both for Cobb-Douglas utility and for CES utility, the analyses suggest that the relative welfare losses from second-best pricing, compared to first-best pricing, are surprisingly small.

Abstract

This paper considers the use of 'long-run cost functions' for congested networks in solving second-best network problems, in which capacity and tolls are instruments. We derive analytical results both for general cost and demand functions and for specific functional forms, namely Bureau of Public Roads cost functions and constant-elasticity demand functions. The latter are also used in a numerical simulation model. We consider second-best cases where only a sub-set of links in a network is subject to tolling and/or capacity choice, and cases with and without a self-financing constraint imposed. We will demonstrate that, under certain assumptions, second-best long-run cost (or actually: generalized price) functions can be derived for most of the cases of interest, which can be used in an applied network model as a substitute for the conventional short-run user cost functions. Doing so reduces the dimensionality of the problem and should therefore be helpful in speeding up procedures for finding second-best optima. © 2009 Elsevier Ltd.

Abstract

This discussion paper led to a publication in 'Transportation Research Part B: Methodological' . The traditional bottleneck model for road congestion promotes the implementation of a triangular, fully time varying, charge as the optimal solution for the road congestion externality. However, cognitive and technological barriers put a practical limit to the degree of differentiation real world implementations can handle. The traditional approach to accommodate for this concern has been a step toll, with the single step coarse charge as its simplest case. In this paper we study how efficiency of the coarse charge can be improved by differentiating its level and timing across groups of travellers. We use the traditional bottleneck model to analyse how the coarse charge can be differentiated over two groups of travellers assuming inelastic peak-hour demand. The results of our analysis indicate that differentiating the coarse charge across two groups of travellers considerably improves its efficiency without increasing cognitive effort and decision making costs for the individual traveller. A numeric illustration reveals a welfare gain of 69% of the first best charge, up from 53% for the generic coarse charge. This increase is similar to what is obtained by moving from the coarse charge to a generic two step toll. Once different groups have been defined, one could in fact achieve the same gains by temporal separation of drivers, for example by use of licence plate numbers. The presented charging regime has a considerable degree of flexibility with respect to share of travellers to attribute to each scheme, which further adds to its merits in practical applicability.