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Traffic Congestion and Congestion Pricing

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Author Info
C. Robin Lindsey (University of Alberta)
Erik T. Verhoef () (Vrije Universiteit Amsterdam)

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Abstract

For several decades growth of traffic volumes has outstripped investments in road infrastructure. The result has been a relentless increase in traffic congestion. This paper reviews the economic principles behind congestion pricing in static and dynamic settings, which derive from the benefits of charging travellers for the externalities they create. Special attention is paid to various complications that make simple textbook congestion pricing models of limited relevance, and dictate that congestion pricing schemes be studied from the perspective of the theory of the second best. These complications include pricing in networks, heterogeneity of users, stochastic congestion, interactions of the transport sector with the rest of the economy, and tolling on private roads. Also the implications of congestion pricing for optimal road capacity are considered, and finally some explanations for the longstanding social and political resistance to road pricing are offered.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 00-101/3.

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Date of creation: 21 Nov 2000
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Handle: RePEc:dgr:uvatin:20000101

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Yang, Hai & Hai-Jun, Huang, 1997. "Analysis of the time-varying pricing of a bottleneck with elastic demand using optimal control theory," Transportation Research Part B: Methodological, Elsevier, vol. 31(6), pages 425-440, November. [Downloadable!] (restricted)
  2. Tabuchi Takatoshi, 1993. "Bottleneck Congestion and Modal Split," Journal of Urban Economics, Elsevier, vol. 34(3), pages 414-431, November. [Downloadable!] (restricted)
  3. E Verhoef & P Nijkamp & P Rietveld, 1997. "Tradeable permits: their potential in the regulation of road transport externalities," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 24(4), pages 527-548, July. [Downloadable!] (restricted)
  4. Verhoef Erik T., 1997. "Externalities," Serie Research Memoranda 0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
  5. Verhoef, Erik T. & Rouwendal, Jan & Rietveld, Piet, 1999. "Congestion Caused by Speed Differences," Journal of Urban Economics, Elsevier, vol. 45(3), pages 533-556, May. [Downloadable!] (restricted)
    Other versions:
  6. Vernon Henderson, J., 1992. "Peak shifting and cost-benefit miscalculations," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 103-121, March. [Downloadable!] (restricted)
  7. Edelson, Noel M, 1971. "Congestion Tolls Under Monopoly," American Economic Review, American Economic Association, vol. 61(5), pages 873-82, December. [Downloadable!] (restricted)
  8. Mayeres, Inge & Proost, Stef, 2001. "Marginal tax reform, externalities and income distribution," Journal of Public Economics, Elsevier, vol. 79(2), pages 343-363, February. [Downloadable!] (restricted)
    Other versions:
  9. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer, vol. 34(1), pages 13-35. [Downloadable!] (restricted)
  10. Arnott, Richard & Kraus, Marvin, 1998. "When are anonymous congestion charges consistent with marginal cost pricing?," Journal of Public Economics, Elsevier, vol. 67(1), pages 45-64, January. [Downloadable!] (restricted)
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  11. 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. [Downloadable!] (restricted)
  12. Liu, Louie Nan & McDonald, John F., 1998. "Efficient Congestion Tolls in the Presence of Unpriced Congestion: A Peak and Off-Peak Simulation Model," Journal of Urban Economics, Elsevier, vol. 44(3), pages 352-366, November. [Downloadable!] (restricted)
  13. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-79, March. [Downloadable!] (restricted)
  14. Arnott, R. & De Palma, A. & Lindseyt, R., 1995. "Recent Developments in the Bottleneck Model," Papers 9523, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
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  15. Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics. [Downloadable!]
  16. Robin Lindsey & Andre de Palma, 1998. "Information and Usage of Congestible Facilities Under Different Pricing Regimes," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 666-692, August. [Downloadable!] (restricted)
  17. Small, Kenneth & Yan, Jia, 2000. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," Discussion Papers dp-00-08, Resources For the Future. [Downloadable!]
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  18. Erik T. Verhoef & Kenneth A. Small, 1999. "Product Differentiation on Roads: Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Tinbergen Institute Discussion Papers 99-066/3, Tinbergen Institute. [Downloadable!]
  19. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May. [Downloadable!] (restricted)
  20. Erik T. Verhoef, 1998. "Second-Best Congestion Pricing in General Static Transportation Networks with Elastic Demand," Tinbergen Institute Discussion Papers 98-086/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  21. De Vany, Arthur S, 1976. "Uncertainty, Waiting Time, and Capacity Utilization: A Stochastic Theory of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 523-41, June. [Downloadable!] (restricted)
  22. Small, K.A. & Gomez-Ibanez, J.A., 1996. "Urban Transportation," Papers 95-96-4, California Irvine - School of Social Sciences.
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  23. C. Robin Lindsey & Erik T. Verhoef, 1999. "Congestion Modelling," Tinbergen Institute Discussion Papers 99-091/3, Tinbergen Institute. [Downloadable!]
  24. Daganzo, Carlos F., 1995. "A pareto optimum congestion reduction scheme," Transportation Research Part B: Methodological, Elsevier, vol. 29(2), pages 139-154, April. [Downloadable!] (restricted)
  25. 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. [Downloadable!] (restricted)
  26. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1992. "Route choice with heterogeneous drivers and group-specific congestion costs," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 71-102, March. [Downloadable!] (restricted)
  27. Nijkamp, Peter & Rienstra, Sytze A, 1995. "Private Sector Involvement in Financing and Operating Transport Infrastructure," The Annals of Regional Science, Springer, vol. 29(2), pages 221-35, May.
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  29. Chu, Xuehao, 1999. "Alternative congestion pricing schedules," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 697-722, November. [Downloadable!] (restricted)
  30. 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. [Downloadable!] (restricted)
  31. 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. [Downloadable!] (restricted)
  32. William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jan Rouwendal & Erik T. Verhoef, 2003. "Second-best Pricing for Imperfect Substitutes in Urban Networks," Tinbergen Institute Discussion Papers 03-085/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  2. Courty, Pascal & Pagliero, Mario, 2008. "Does Responsive Pricing Smooth Demand Shocks?," CEPR Discussion Papers 6662, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Yafeng Yin & Siriphong Lawphongpanich, 2009. "Alternative marginal-cost pricing for road networks," Netnomics, Springer, vol. 10(1), pages 77-83, April. [Downloadable!] (restricted)
  4. repec:mop:credwp:05.04.57 is not listed on IDEAS
  5. Richard Arnott & Eren Inci, 2008. "The Stability Of Downtown Parking And Traffic Congestion," Working Papers 200813, University of California at Riverside, Department of Economics, revised Nov 2008. [Downloadable!]
    Other versions:
  6. André De Palma & Robin Lindsey, 2009. "Traffic Congestion Pricing Methods and Technologies," Working Papers hal-00414526_v1, HAL. [Downloadable!]
  7. Ronnie Schöb, 2005. "Not optimal, but Effective: the Multi-Mode Ticket for Reducing Urban Traffic Congestion in Medium-Sized Towns," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 3(3), pages 28-33, November. [Downloadable!]
  8. Christelle Viauroux, 2007. "Optimal pricing of endogenous congestion: a disaggregated approach," University of Cincinnati, Economics Working Papers Series 2007-04, University of Cincinnati, Department of Economics. [Downloadable!]
  9. 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. [Downloadable!]
    Other versions:
  10. McArthur, David Philip & Thorsen, Inge & Ubøe, Jan, 2009. "Congested Interregional Infrastructure, Road Pricing and Regional Labour Markets," Discussion Papers 2009/3, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
  11. Erik T. Verhoef & Jan Rouwendal, 2001. "A Structural Model of Traffic Congestion," Tinbergen Institute Discussion Papers 01-026/3, Tinbergen Institute, revised 17 Oct 2003. [Downloadable!]
  12. C. Robin Lindsey & Erik T. Verhoef, 1999. "Congestion Modelling," Tinbergen Institute Discussion Papers 99-091/3, Tinbergen Institute. [Downloadable!]
  13. Safirova, Elena A. & Houde, Sébastien & Coleman, Conrad T. & Harrington, Winston & Lipman, D. Abram, 2006. "Long-Term Consequences of Congestion Pricing: A Small Cordon in the Hand Is Worth Two in the Bush," Discussion Papers dp-06-42, Resources For the Future. [Downloadable!]
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