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Optimal congestion pricing with diverging long-run and short-run scheduling preferences

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  • Verhoef, Erik T.

Abstract

Traffic congestion is among the main market failures in modern cities. Dynamic marginal external cost pricing is the textbook economic response to this externality. Recent empirical work has shown that there is an important distinction between short-run departure time choice versus long-run routine formation of commuters, also characterized by differences in values of time and schedule delays for the short-run versus the long-run problem. This paper investigates whether this affects optimal pricing of congested roads. Using a dynamic model of congestion, and integrating it with a dynamic model of routine formation, it is found that contrary to expectation, short-run optimal congestion pricing alone cannot optimally decentralize the optimal formation of long-run routines. A separate instrument is therefore needed to optimize routine formation.

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  • Verhoef, Erik T., 2020. "Optimal congestion pricing with diverging long-run and short-run scheduling preferences," Transportation Research Part B: Methodological, Elsevier, vol. 134(C), pages 191-209.
    • Handle: RePEc:eee:transb:v:134:y:2020:i:c:p:191-209
    DOI: 10.1016/j.trb.2020.02.009
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    Cited by:

    1. Zhong, Shaopeng & Jiang, Yu & Nielsen, Otto Anker, 2022. "Lexicographic multi-objective road pricing optimization considering land use and transportation effects," European Journal of Operational Research, Elsevier, vol. 298(2), pages 496-509.
    2. Zhang, Fangni & Lindsey, Robin & Yang, Hai & Shao, Chaoyi & Liu, Wei, 2022. "Two-sided pricing strategies for a parking sharing platform: Reselling or commissioning?," Transportation Research Part B: Methodological, Elsevier, vol. 163(C), pages 40-63.
    3. Jinwon Kim & Jucheol Moon, 2022. "Congestion Costs and Scheduling Preferences of Car Commuters in California: Estimates Using Big Data," Working Papers 2201, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    4. Verhoef, Erik T. & Silva, Hugo E., 2017. "Dynamic equilibrium at a congestible facility under market power," Transportation Research Part B: Methodological, Elsevier, vol. 105(C), pages 174-192.

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    More about this item

    Keywords

    Congestion pricing; Dynamic traffic congestion; Scheduling;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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