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The Value of "Value Princing" of Roads: Second-Best Pricing and Product Differentiation

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Author Info
Small, K.A.
Yan, J.

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Abstract

Some road-pricing demonstrations use an approach called "value-pricing", in which travelers can choose between a free but congested roadway. Recent research has uncovered a potentially serious problem for such demonstrations: in certain models, second-best tolls are far lower than those typically charged, and the welfare gains from profit maximization are small or even negative.

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Publisher Info
Paper provided by California Irvine - School of Social Sciences in its series Papers with number 99-00-02.

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Length: 22 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:calirv:99-00-02

Contact details of provider:
Postal: UNIVERSITY OF CALIFORNIA IRVINE, SCHOOL OF SOCIAL SCIENCES, IRVINECALIFORNIA 91717 U.S.A.

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Related research
Keywords: PRICES ; ROADS ; SOCIAL WELFARE;

Other versions of this item:

Find related papers by JEL classification:
R41 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Transportation: Demand, Supply, and Congestion
R48 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government Pricing; Regulatory Policies
D62 - Microeconomics - - Welfare Economics - - - Externalities

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. Bradford, Richard M., 1996. "Pricing, routing, and incentive compatibility in multiserver queues," European Journal of Operational Research, Elsevier, vol. 89(2), pages 226-236, March. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  3. 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)
  4. 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!]
  5. 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.
    Other versions:
  6. Viton Philip A., 1995. "Private Roads," Journal of Urban Economics, Elsevier, vol. 37(3), pages 260-289, May. [Downloadable!] (restricted)
  7. 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)
  8. 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)
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. Hideo Konishi, 2001. "Uniqueness of User Equilibrium in Transportation Networks with Heterogeneous Commuters," Boston College Working Papers in Economics 494, Boston College Department of Economics, revised 14 Nov 2002. [Downloadable!]
  2. Bruno De Borger & Fay Dunkerley & Stef Proost, 2008. "The Interaction between Tolls and Capacity Investment in Serial and Parallel Transport Networks," Review of Network Economics, Concept Economics, vol. 7(1), pages 136-158, March. [Downloadable!]
    Other versions:
  3. Lei Zhang & David Levinson, 2006. "Economics of Road Network Ownership," Working Papers 000009, University of Minnesota: Nexus Research Group. [Downloadable!]
  4. Winston T.H. Koh, 2003. "Congestion Control and Vehicle Ownership Restriction: The Choice of an Optimal Quota Policy," Working Papers 03-2004, Singapore Management University, School of Economics. [Downloadable!]
  5. 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!]
  6. Parry, Ian & Harrington, Winston & Nelson, Per-Kristian & Safirova, Elena & Mason, Dave & Gillingham, Kenneth, 2003. "Welfare and Distributional Effects of Road Pricing Schemes for Metropolitan Washington, DC," Discussion Papers dp-03-57, Resources For the Future. [Downloadable!]
    Other versions:
  7. Marvin Kraus, 2002. "A New Look at the Two-Mode Problem," Boston College Working Papers in Economics 551, Boston College Department of Economics. [Downloadable!] (restricted)
    Other versions:
  8. Erin T. Mansur & Sheila M. Olmstead, 2007. "The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations," NBER Working Papers 13513, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Andre De Palma & Moez Kilani & Robin Lindsey, 2006. "The Economics of Truck Toll Lanes," ERSA conference papers ersa06p896, European Regional Science Association. [Downloadable!]
    Other versions:
  10. De Borger B., 2006. "Commuting, congestion tolls and noncompetitive labour markets: optimal congestion pricing in a wage bargaining model," Working Papers 2006014, University of Antwerp, Faculty of Applied Economics. [Downloadable!]
  11. Safirova, Elena A. & Houde, Sébastien & Lipman, D. Abram & Harrington, Winston & Bagliano, Andrew D., 2006. "Congestion Pricing: Long-Term Economic and Land-Use Effects," Discussion Papers dp-06-37, Resources For the Future. [Downloadable!]
  12. Parry, Ian, 2001. "How Should Metropolitan Washington, D.C., Finance Its Transportation Deficit?," Discussion Papers dp-01-12, Resources For the Future. [Downloadable!]
  13. Paul Calcott & Shuntian Yao, 2005. "Competition between highway operators: can we expect toll differentiation?," Economic Growth centre Working Paper Series 0504, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre. [Downloadable!]
  14. Christelle Viauroux, 2007. "Optimal pricing of endogenous congestion: a disaggregated approach," UMBC Economics Department Working Papers 09-107, UMBC Department of Economics, revised 17 Jul 2009. [Downloadable!]
  15. Parry, Ian & Bento, Antonio, 2000. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Discussion Papers dp-00-51, Resources For the Future. [Downloadable!]
    Other versions:
  16. Kenneth A. Small & Clifford Winston & Jia Yan, 2005. "Differentiated Road Pricing, Express Lanes and Carpools: Exploiting Heterogeneous Preferences in Policy Design," Working Papers 050616, University of California-Irvine, Department of Economics, revised Mar 2006. [Downloadable!]
  17. Calthrop E. & De Borger B. & Proost S., 2006. "Externalities and partial tax reform: Does it make sense to tax road freight (but not passenger) transport?," Working Papers 2006017, University of Antwerp, Faculty of Applied Economics. [Downloadable!]
    Other versions:
  18. Parry, Ian, 2000. "Comparing the Efficiency of Alternative Policies for Reducing Traffic Congestion," Discussion Papers dp-00-28, Resources For the Future. [Downloadable!]
    Other versions:
  19. C. Robin Lindsey & Erik T. Verhoef, 2000. "Traffic Congestion and Congestion Pricing," Tinbergen Institute Discussion Papers 00-101/3, Tinbergen Institute. [Downloadable!]
  20. Lei Zhang & David Levinson & Shanjiang Zhu, 2007. "Agent-Based Model of Price Competition and Product Differentiation on Congested Networks," Working Papers 200809, University of Minnesota: Nexus Research Group. [Downloadable!]
  21. Bruno De Borger & Stef Proost & Kurt Van Dender, 2003. "Congestion and tax competition in a parallel network," Energy, Transport and Environment Working Papers Series ete0309, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment. [Downloadable!]
    Other versions:
  22. Pedro Cantos-Sanchez & Rafael Moner-Colonques & Jose J. Sempere-Monerris & Oscar Alvarez, 2008. "Viability of a New Road Infrastructure with Heterogeneous Users in Madrid Access," Working Papers 2008-06, FEDEA. [Downloadable!]
  23. Verhoef, Erik Teodoor & Small, Kenneth A., 1999. "Product Differentiation on Roads: Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," ERSA conference papers ersa99pa358, European Regional Science Association. [Downloadable!]
    Other versions:
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This page was last updated on 2009-11-20.


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