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Second-best congestion pricing in general static transportation networks with elastic demands

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  • Verhoef, Erik T.

Abstract

This paper studies the second-best problem where not all links of a congestedtransportation network can be tolled. The second-best tax rule for thisproblem is derived for general static networks, so that the solution presentedis valid for any graph of the network and any set of tolling points available.A number of known second-best tax rules are shown to be special cases of thegeneral solution presented. It is further demonstrated that, for instance byusing the concept of 'virtual links', the same method can be applied to abroader class of second-best problems in static networks. Finally, a smallnetwork is used to demonstrate numerically that an interior second-bestoptimum need not always be unique, and need not always exist. However, bothexamples require extreme differences in marginal external costs across links,and a non-optimal toll-point to be used, which casts doubt on the practicalrelevance of this complication.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 32 (2002)
Issue (Month): 3 (May)
Pages: 281-310

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Handle: RePEc:eee:regeco:v:32:y:2002:i:3:p:281-310

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References

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  1. May, A. D. & Milne, D. S., 2000. "Effects of alternative road pricing systems on network performance," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(6), pages 407-436, August.
  2. Erik T. Verhoef, 2000. "Second-Best Congestion Pricing in General Networks - Algorithms for Finding Second-Best Optimal Toll Levels and Toll Points," Tinbergen Institute Discussion Papers 00-084/3, Tinbergen Institute.
  3. A. de Palma & Y. Nesterov, 1997. "Optimization formulations and static equilibrium in congested transportation networks," THEMA Working Papers 97-17, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Liu, Louie Nan & McDonald, John F., 1999. "Economic efficiency of second-best congestion pricing schemes in urban highway systems," Transportation Research Part B: Methodological, Elsevier, vol. 33(3), pages 157-188, April.
  5. Verhoef, E.T. & Small, K.A., 1999. "Product Differentiation on Roads Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Papers 99-00-01, California Irvine - School of Social Sciences.
  6. Glazer, Amihai & Niskanen, Esko, 1992. "Parking fees and congestion," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 123-132, March.
  7. Yan, Hai & Lam, William H. K., 1996. "Optimal road tolls under conditions of queueing and congestion," Transportation Research Part A: Policy and Practice, Elsevier, vol. 30(5), pages 319-332, September.
  8. Verhoef, Erik T., 1999. "Time, speeds, flows and densities in static models of road traffic congestion and congestion pricing," Regional Science and Urban Economics, Elsevier, vol. 29(3), pages 341-369, May.
  9. Sullivan, Arthur M., 1983. "Second-best policies for congestion externalities," Journal of Urban Economics, Elsevier, vol. 14(1), pages 105-123, July.
  10. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1990. "Economics of a bottleneck," Journal of Urban Economics, Elsevier, vol. 27(1), pages 111-130, January.
  11. Small, Kenneth A. & Gomez-Ilbanez, Jose A., 1998. "Road Pricing for Congestion Management: The Transition from Theory to Policy," University of California Transportation Center, Working Papers qt8kk909p1, University of California Transportation Center.
  12. Braid, Ralph M., 1989. "Uniform versus peak-load pricing of a bottleneck with elastic demand," Journal of Urban Economics, Elsevier, vol. 26(3), pages 320-327, November.
  13. Verhoef Erik T., 1997. "Externalities," Serie Research Memoranda 0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  14. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September.
  15. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
  16. Wilson, John D., 1983. "Optimal road capacity in the presence of unpriced congestion," Journal of Urban Economics, Elsevier, vol. 13(3), pages 337-357, May.
  17. Verhoef, Erik T. & Emmerink, Richard H. M. & Nijkamp, Peter & Rietveld, Piet, 1996. "Information provision, flat and fine congestion tolling and the efficiency of road usage," Regional Science and Urban Economics, Elsevier, vol. 26(5), pages 505-529, August.
  18. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
  19. Arnott, Richard J., 1979. "Unpriced transport congestion," Journal of Economic Theory, Elsevier, vol. 21(2), pages 294-316, October.
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