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State-dependent congestion pricing with reference-dependent preferences

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  • Lindsey, Robin
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    Abstract

    Demand and capacity fluctuations are common for roads and other congestible facilities. With ongoing advances in pricing technology and ways of communicating information to prospective users, state-dependent congestion pricing is becoming practical. But it is still rare or nonexistent in many potential applications. One explanation is that people dislike uncertainty about how much they will pay. To explore this idea, a model of reference-dependent preferences is developed based on Köszegi and Rabin (2006). Using a facility yields an “intrinsic” utility and a “gain–loss” utility measured relative to the probability distribution over states of utility outcomes. Two types of preferences are analyzed: bundled preferences in which gains and losses are perceived for overall utility, and unbundled preferences in which gains and losses are perceived separately for the toll and other determinants of utility.

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    Bibliographic Info

    Article provided by Elsevier in its journal Transportation Research Part B: Methodological.

    Volume (Year): 45 (2011)
    Issue (Month): 10 ()
    Pages: 1501-1526

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    Handle: RePEc:eee:transb:v:45:y:2011:i:10:p:1501-1526

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    Related research

    Keywords: Congestion pricing; State-dependent pricing; Reference-dependent preferences;

    References

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    Cited by:
    1. Coria, Jessica & Bonilla, Jorge & Grundström, Maria & Pleijel, Håkan, 2013. "Air Pollution Dynamics and the Need for Temporally Differentiated Road Pricing," Working Papers in Economics 572, University of Gothenburg, Department of Economics.
    2. Kemel, Emmanuel & Paraschiv, Corina, 2013. "Prospect Theory for joint time and money consequences in risk and ambiguity," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 81-95.

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