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Integrating congestion pricing, transit subsidies and mode choice

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  • Basso, Leonardo J.
  • Jara-Díaz, Sergio R.
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    Abstract

    We model and analyze optimal (welfare maximizing) prices and design of transport services in a bimodal context. Car congestion and transit design are simultaneously introduced and consumers choose based on the full price they perceive. The optimization variables are the congestion toll, the transit fare (and hence the level of subsidies) and transit frequency. We obtain six main results: (i) the optimal car-transit split is generally different from the total cost minimizing one; (ii) optimal congestion and transit price are interdependent and have an optimal frequency attached; (iii) the optimal money price difference together with the optimal frequency yield the optimal modal split; (iv) if this modal split is used in traditional stand-alone formulations – where each mode is priced independently–resulting congestion tolls and transit subsidies and fares are consistent with the optimal money price difference; (v) self-financing of the transport sector is feasible; and (vi) investment in car infrastructure induces an increase in generalized cost for all public transport users.

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    Bibliographic Info

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

    Volume (Year): 46 (2012)
    Issue (Month): 6 ()
    Pages: 890-900

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    Handle: RePEc:eee:transa:v:46:y:2012:i:6:p:890-900

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    Related research

    Keywords: Transit subsidy; Congestion pricing; Downs-Thomson paradox; Mogridge paradox;

    References

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    1. Gilles Duranton & Matthew A. Turner, 2009. "The Fundamental Law of Road Congestion: Evidence from US cities," NBER Working Papers 15376, National Bureau of Economic Research, Inc.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195102680, October.
    3. Sergio R. Jara-Díaz & Antonio Gschwender, 2003. "From the Single Line Model to the Spatial Structure of Transit Services: Corridors or Direct?," Journal of Transport Economics and Policy, London School of Economics and University of Bath, London School of Economics and University of Bath, vol. 37(2), pages 261-277, May.
    4. Huang, Hai-Jun, 2000. "Fares and tolls in a competitive system with transit and highway: the case with two groups of commuters," Transportation Research Part E: Logistics and Transportation Review, Elsevier, Elsevier, vol. 36(4), pages 267-284, December.
    5. Ian W. H. Parry & Kenneth A. Small, 2009. "Should Urban Transit Subsidies Be Reduced?," American Economic Review, American Economic Association, American Economic Association, vol. 99(3), pages 700-724, June.
    6. Proost, Stef & Dender, Kurt Van, 2008. "Optimal urban transport pricing in the presence of congestion, economies of density and costly public funds," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 42(9), pages 1220-1230, November.
    7. Nie, Yu (Marco) & Liu, Yang, 2010. "Existence of self-financing and Pareto-improving congestion pricing: Impact of value of time distribution," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 44(1), pages 39-51, January.
    8. Theodore Tsekeris & Stefan Voß, 2009. "Design and evaluation of road pricing: state-of-the-art and methodological advances," Netnomics, Springer, Springer, vol. 10(1), pages 5-52, April.
    9. Basso, Leonardo J. & Guevara, Cristián Angelo & Gschwender, Antonio & Fuster, Marcelo, 2011. "Congestion pricing, transit subsidies and dedicated bus lanes: Efficient and practical solutions to congestion," Transport Policy, Elsevier, vol. 18(5), pages 676-684, September.
    10. Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, American Economic Association, vol. 62(4), pages 591-604, September.
    11. De Borger, Bruno & Wouters, Sandra, 1998. "Transport externalities and optimal pricing and supply decisions in urban transportation: a simulation analysis for Belgium," Regional Science and Urban Economics, Elsevier, vol. 28(2), pages 163-197, March.
    12. Sergio Jara-Díaz & Antonio Gschwender, 2009. "The effect of financial constraints on the optimal design of public transport services," Transportation, Springer, Springer, vol. 36(1), pages 65-75, January.
    13. Kockelman, Kara M. & Kalmanje, Sukumar, 2005. "Credit-based congestion pricing: a policy proposal and the public's response," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 39(7-9), pages 671-690.
    14. Danielis, Romeo & Marcucci, Edoardo, 2002. "Bottleneck road congestion pricing with a competing railroad service," Transportation Research Part E: Logistics and Transportation Review, Elsevier, Elsevier, vol. 38(5), pages 379-388, September.
    15. Sergio Jara-Díaz & Antonio Gschwender, 2003. "Towards a general microeconomic model for the operation of public transport," Transport Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 23(4), pages 453-469, July.
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    Cited by:
    1. Ioannis Tikoudis & Erik T. Verhoef & Jos N. van Ommeren, 2013. "On Revenue Recycling and the Welfare Effects of Second-Best Congestion Pricing in a Monocentric City," Tinbergen Institute Discussion Papers 13-031/VIII, Tinbergen Institute.
    2. Canoquena, Joao Manuel da Costa, 2013. "Reconceptualising policy integration in road safety management," Transport Policy, Elsevier, vol. 25(C), pages 61-80.
    3. Socorro, M. Pilar & Viecens, M. Fernanda, 2013. "The effects of airline and high speed train integration," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 49(C), pages 160-177.

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