Second-best Pricing for Imperfect Substitutes in Urban Networks
AbstractThis paper considers second-best pricing as it arises through incomplete coverage of full networks. The main principles are first reviewed by considering the classic two-route problem and some extensions that have been studied more recently. In most of these studies the competing routes are assumed to be perfect substitutes, which is probably not the case for most parallel roads in reality, and even less likely for the case where competing connections represent different transport modes. In this paper a modelling framework in which the alternatives are imperfect substitutes is developed and numerical results for two roads and two modes are presented. In the model, trip generation and trip distribution are distinguished in a way that is consistent with economic theory. The model is used to consider situations in which one route or mode cannot be tolled. Simulation results show that, for the chosen parameter values, there is a substantial difference between the effec!tiveness of policies in which the capacities have to be taken as given, and those in which capacity of at least one mode can be changed. A striking feature of the policy in which the capacities of both modes/routes and the railway fare/toll on one road can be used as policy instruments is the existence of two equilibria for a range of values of â. In one equilibrium there are substantial numbers of users of both modes, whereas in the other use of one mode is negligible.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-085/3.
Date of creation: 14 Oct 2003
Date of revision:
Contact details of provider:
Web page: http://www.tinbergen.nl
traffic congestion; road pricing; second best policies; two mode problem;
Other versions of this item:
- Rouwendal, Jan & Verhoef, Erik T., 2004. "2. Second-Best Pricing For Imperfect Substitutes In Urban Networks," Research in Transportation Economics, Elsevier, vol. 9(1), pages 27-60, January.
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-23 (All new papers)
- NEP-GEO-2004-08-23 (Economic Geography)
- NEP-MIC-2004-08-23 (Microeconomics)
- NEP-URE-2003-10-20 (Urban & Real Estate Economics)
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.:
- Yang, Hai & Meng, Qiang, 2002. "A note on "highway pricing and capacity choice in a road network under a build-operate-transfer scheme"," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(7), pages 659-663, August.
- C. Robin Lindsey & Erik T. Verhoef, 2000. "Traffic Congestion and Congestion Pricing," Tinbergen Institute Discussion Papers 00-101/3, Tinbergen Institute.
- Small, Kenneth A & Rosen, Harvey S, 1981.
"Applied Welfare Economics with Discrete Choice Models,"
Econometric Society, vol. 49(1), pages 105-30, January.
- Harvey S. Rosen & Kenneth A. Small, 1981. "Applied Welfare Economics with Discrete Choice Models," NBER Working Papers 0319, National Bureau of Economic Research, Inc.
- Small, Kenneth A. & Gomez-Ibanez, Jose A., 1999.
Handbook of Regional and Urban Economics,
in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 46, pages 1937-1999
- Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, vol. 62(4), pages 591-604, September.
- 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.
- 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.
- 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.
- 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.
- Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
- Daniel Albalate & Germa Bel, 2008. "Motorways, tolls and road safety.Evidence from European Panel Data," IREA Working Papers 200802, University of Barcelona, Research Institute of Applied Economics, revised Feb 2008.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).
If references are entirely missing, you can add them using this form.