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Why Congestion Tolling could be good for the Consumer: The Effects of Heterogeneity in the Values of Schedule Delay and Time on the Effects of Tolling

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Author Info

  • Vincent van den Berg

    (VU University Amsterdam)

  • Erik T. Verhoef

    (VU University Amsterdam)

Abstract

In studying congestion tolling, it is important to account for heterogeneity in preferences of drivers, as ignoring it can bias the welfare gains. We analyse the effects of tolling, in the bottleneck model, with continuous heterogeneity in the value of time and schedule delay. The welfare gain of a time-variant toll increases with heterogeneity in the value of schedule delay. With heterogeneity, tolling makes the arrival ordering more efficient, and this lowers scheduling costs. If there is not much more heterogeneity in the value of time than in the value of schedule delay, then first-best tolling decreases the generalised price for most users. In our model, first-best tolling is not most detrimental for the lowest values of time and schedule delay: it raises prices more for users with an average value of schedule delay and a slightly larger value of time. Further, the lowest values of time are among those who gain most from a public pay-lane.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-016/3.

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Date of creation: 28 Jan 2010
Date of revision: 02 Aug 2012
Handle: RePEc:dgr:uvatin:20100016

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Web page: http://www.tinbergen.nl

Related research

Keywords: biases in calculated welfare effects; bottleneck model; distributional effects; heterogeneity in the value of schedule delay; heterogeneity in the value of time; second-best tolls.;

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  1. Small, Kenneth A., 2001. "The Value of Pricing," University of California Transportation Center, Working Papers qt0rm449sx, University of California Transportation Center.
  2. Kenneth A. Small & Clifford Winston & Jia Yan, 2005. "Uncovering the Distribution of Motorists' Preferences for Travel Time and Reliability," Econometrica, Econometric Society, vol. 73(4), pages 1367-1382, 07.
  3. Layard, Richard, 1977. "The Distributional Effects of Congestion Taxes," Economica, London School of Economics and Political Science, vol. 44(175), pages 297-304, August.
  4. Erik T. Verhoef & Kenneth A. Small, 2004. "Product Differentiation on Roads," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 38(1), pages 127-156, January.
  5. Richard Arnott, 1990. "A Temporal and Spatial Equilibrium Analysis of Commuter Parking," Discussion Papers 884, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Inge Mayeres & Stef Proost, 1998. "Marginal Tax Reform, Externalities and Income Distribution," Center for Economic Studies - Discussion papers ces9832, Katholieke Universiteit Leuven, Centrum voor Economische Studiƫn.
  7. repec:reg:wpaper:179 is not listed on IDEAS
  8. 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.
  9. Richard Arnott & Andre de Palma & Robin Lindsey, 1993. "The Welfare Effects Of Congestion Tolls With Heterogeneous Commuters," Boston College Working Papers in Economics 231, Boston College Department of Economics.
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