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Impact of congestion charging on the transit market: An inter-modal equilibrium model

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  • Wichiensin, Muanmas
  • Bell, Michael G.H.
  • Yang, Hai
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Abstract

An inter-modal equilibrium model links an urban road network subject to a congestion charge to a parallel urban transit market, with a view to finding the optimum congestion charge consistent with the commercial decisions of the transit operator(s). A congestion charge is set to maximise social surplus. Travel behaviour is assumed to conform to elastic-demand user equilibrium traffic assignment. The transit market is assumed to be either a profit maximising monopoly or a profit maximising duopoly competing non-cooperatively. The operator(s) set the fares to maximise profits and the supply of transit services are determined by the resulting demand. The problem has been formulated as a bi-level programme with the determination of the congestion charge on the upper level and the setting of transit fares on the lower level. In the case of non-cooperating operators, the Bertrand-Nash equilibrium fares are sought. The results of the model are analysed for a small example based loosely on Edinburgh. This reveals the importance of competition in the transit market for the trade off between the government, the transit provider(s) and the travellers.

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Bibliographic Info

Article provided by Elsevier in its journal Transportation Research Part A: Policy and Practice.

Volume (Year): 41 (2007)
Issue (Month): 7 (August)
Pages: 703-713

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Handle: RePEc:eee:transa:v:41:y:2007:i:7:p:703-713

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References

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  1. Dixit, Avinash, 1982. "Recent Developments in Oligopoly Theory," American Economic Review, American Economic Association, vol. 72(2), pages 12-17, May.
  2. Erik T. Verhoef & Kenneth A. Small, 2004. "Product Differentiation on Roads," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 38(1), pages 127-156, January.
  3. Yang, Hai & Bell, Michael G. H., 1997. "Traffic restraint, road pricing and network equilibrium," Transportation Research Part B: Methodological, Elsevier, vol. 31(4), pages 303-314, August.
  4. de Palma, Andre, 1992. "A Game-Theoretic Approach to the Analysis of Simple Congested Networks," American Economic Review, American Economic Association, vol. 82(2), pages 494-500, May.
  5. 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.
  6. Ferrari, Paolo, 1999. "A model of urban transport management," Transportation Research Part B: Methodological, Elsevier, vol. 33(1), pages 43-61, February.
  7. Yang, Hai & Huang, Hai-Jun, 1998. "Principle of marginal-cost pricing: how does it work in a general road network?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(1), pages 45-54, January.
  8. Joskow, Paul L, 1975. "Firm Decision-making Processes and Oligopoly Theory," American Economic Review, American Economic Association, vol. 65(2), pages 270-79, May.
  9. Zubieta, Lourdes, 1998. "A network equilibrium model for oligopolistic competition in city bus services," Transportation Research Part B: Methodological, Elsevier, vol. 32(6), pages 413-422, August.
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Cited by:
  1. José R. Correa & Nicolás Figueroa & Nicolás E. Stier-Moses, 2008. "Pricing with markups in industries with increasing marginal costs," Documentos de Trabajo 256, Centro de Economía Aplicada, Universidad de Chile.
  2. Preston, John, 2008. "Competition in transit markets," Research in Transportation Economics, Elsevier, vol. 23(1), pages 75-84, January.
  3. Kutzbach, Mark J., 2009. "Motorization in developing countries: Causes, consequences, and effectiveness of policy options," Journal of Urban Economics, Elsevier, vol. 65(2), pages 154-166, March.

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