Nonlinear pricing on private roads with congestion and toll collection costs
AbstractNonlinear pricing (a form of second-degree price discrimination) is widely used in transportation and other industries but it has been largely overlooked in the road-pricing literature. This paper explores the incentives for a profit-maximizing toll-road operator to adopt some simple nonlinear pricing schemes when there is congestion and collecting tolls is costly. Users are assumed to differ in their demands to use the road. Regardless of the severity of congestion, an access fee is always profitable to implement either as part of a two-part tariff or as an alternative to paying a toll. Use of access fees for profit maximization can increase or decrease welfare relative to usage-only pricing for profit maximization. Hence a ban on access fees could reduce welfare.
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Bibliographic InfoArticle provided by Elsevier in its journal Transportation Research Part B: Methodological.
Volume (Year): 45 (2011)
Issue (Month): 1 (January)
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Other versions of this item:
- Lindsey, Robin & Wang, Judith & Yang, Hai, 2010. "Nonlinear Pricing on Private Roads with Congestion and Toll Collection Costs," Working Papers 2010-3, University of Alberta, Department of Economics.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
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