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Second-Best Congestion Pricing in General Static Transportation Networks with Elastic Demand

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  • Erik T. Verhoef

    () (Vrije Universiteit Amsterdam)

Abstract

This paper studies the second-best problem where not all links of a congested transportation network can be tolled. The second-best tax rule for this problem is derived for general static networks, so that the solution presented is valid for any graph of the network, and for any set of tolling points available on that network. It is demonstrated that the solution obtained indeed generalizes a number of known second-best tax rules presented earlier in the literature, for specific cases of the general problem discussed in the present paper. Finally, it is demonstrated that, for instance by using the concept of 'virtual links', the analysis can be applied rather easily also to a broader class of second-best problems in static networks.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 98-086/3.

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Date of creation: 27 Aug 1998
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Handle: RePEc:dgr:uvatin:19980086

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References

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  1. Richard Arnott & Andre de Palma & Robin Lindsey, 1985. "Economics of a Bottleneck," Working Papers 636, Queen's University, Department of Economics.
  2. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September.
  3. Verhoef, Erik T., 1999. "Time, speeds, flows and densities in static models of road traffic congestion and congestion pricing," Regional Science and Urban Economics, Elsevier, vol. 29(3), pages 341-369, May.
  4. Verhoef, E.T. & Small, K.A., 1999. "Product Differentiation on Roads Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Papers 99-00-01, California Irvine - School of Social Sciences.
  5. A. de Palma & Y. Nesterov, 1997. "Optimization formulations and static equilibrium in congested transportation networks," THEMA Working Papers 97-17, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  6. Yan, Hai & Lam, William H. K., 1996. "Optimal road tolls under conditions of queueing and congestion," Transportation Research Part A: Policy and Practice, Elsevier, vol. 30(5), pages 319-332, September.
  7. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
  8. Liu, Louie Nan & McDonald, John F., 1999. "Economic efficiency of second-best congestion pricing schemes in urban highway systems," Transportation Research Part B: Methodological, Elsevier, vol. 33(3), pages 157-188, April.
  9. Verhoef Erik T., 1997. "Externalities," Serie Research Memoranda 0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  10. Braid, Ralph M., 1989. "Uniform versus peak-load pricing of a bottleneck with elastic demand," Journal of Urban Economics, Elsevier, vol. 26(3), pages 320-327, November.
  11. Sullivan, Arthur M., 1983. "Second-best policies for congestion externalities," Journal of Urban Economics, Elsevier, vol. 14(1), pages 105-123, July.
  12. Arnott, Richard J., 1979. "Unpriced transport congestion," Journal of Economic Theory, Elsevier, vol. 21(2), pages 294-316, October.
  13. Verhoef, Erik T. & Emmerink, Richard H. M. & Nijkamp, Peter & Rietveld, Piet, 1996. "Information provision, flat and fine congestion tolling and the efficiency of road usage," Regional Science and Urban Economics, Elsevier, vol. 26(5), pages 505-529, August.
  14. Wilson, John D., 1983. "Optimal road capacity in the presence of unpriced congestion," Journal of Urban Economics, Elsevier, vol. 13(3), pages 337-357, May.
  15. Glazer, Amihai & Niskanen, Esko, 1992. "Parking fees and congestion," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 123-132, March.
  16. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
  17. Erik T. Verhoef, 2000. "Second-Best Congestion Pricing in General Networks - Algorithms for Finding Second-Best Optimal Toll Levels and Toll Points," Tinbergen Institute Discussion Papers 00-084/3, Tinbergen Institute.
  18. Small, Kenneth A. & Gomez-Ilbanez, Jose A., 1998. "Road Pricing for Congestion Management: The Transition from Theory to Policy," University of California Transportation Center, Working Papers qt8kk909p1, University of California Transportation Center.
  19. 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.
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Citations

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Cited by:
  1. Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
  2. Verhoef, Erik T., 2007. "Second-best road pricing through highway franchising," Journal of Urban Economics, Elsevier, vol. 62(2), pages 337-361, September.
  3. Larsen, Morten Marott & Pilegaard, Ninette & Ommeren, Jos Van, 2008. "Congestion and residential moving behaviour," Regional Science and Urban Economics, Elsevier, vol. 38(4), pages 378-387, July.
  4. Jiashan Wang & Yingying Kang & Changhyun Kwon & Rajan Batta, 2012. "Dual Toll Pricing for Hazardous Materials Transport with Linear Delay," Networks and Spatial Economics, Springer, vol. 12(1), pages 147-165, March.
  5. Erik T. Verhoef & Andrew Koh & Simon Shepherd, 2008. "Pricing, Capacity and Long-run Cost Functions for First-best and Second-best Network Problems," Tinbergen Institute Discussion Papers 08-056/3, Tinbergen Institute.
  6. André de Palma & Robin Lindsey & Fang Wu, 2007. "Private operators and time-of-day tolling on a congested road network," THEMA Working Papers 2007-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  7. Parry, Ian W. H. & Bento, Antonio, 2002. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Journal of Urban Economics, Elsevier, vol. 51(2), pages 339-365, March.
  8. C. Robin Lindsey & Erik T. Verhoef, 2000. "Traffic Congestion and Congestion Pricing," Tinbergen Institute Discussion Papers 00-101/3, Tinbergen Institute.
  9. Maarten van 't Riet, 2011. "The link approach to measuring consumer surplus in transport networks," CPB Discussion Paper 199, CPB Netherlands Bureau for Economic Policy Analysis.
  10. Van Dender, Kurt, 2004. "Pricing transport networks with fixed residential location," Regional Science and Urban Economics, Elsevier, vol. 34(3), pages 289-307, May.
  11. Erik T. Verhoef, 1998. "The Implementation of Marginal External Cost Pricing in Road Transport," Tinbergen Institute Discussion Papers 98-091/3, Tinbergen Institute.
  12. Winston, Clifford & Yan, Jia, 2011. "Can privatization of U.S. highways improve motorists' welfare?," Journal of Public Economics, Elsevier, vol. 95(7), pages 993-1005.
  13. Erik T. Verhoef, 2000. "Second-Best Congestion Pricing in General Networks - Algorithms for Finding Second-Best Optimal Toll Levels and Toll Points," Tinbergen Institute Discussion Papers 00-084/3, Tinbergen Institute.
  14. Verhoef, Erik Teodoor, 2000. "The Generalized Second-Best Network Congestion Pricing Problem," ERSA conference papers ersa00p336, European Regional Science Association.

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