This paper proposes a stochastic congestion and pricing model that combines a bottleneck model with stochastic queuing to study roadway congestion and pricing. Employing this model, two pricing schemes are developed: one is omniscient pricing for which the transportation administrative agency is assumed to be aware of each and every traveler's cost structure (i.e., their detailed valuation of journey cost as well as early and late penalties), and the other is observable pricing, for which only queuing delay is considered. Travelers are characterized by their late-acceptance level and the effects of various compositions of late-averse, late-tolerant and late-neutral travelers on congestion patterns with and without pricing are discussed. Numerical simulation indicates that omniscient pricing scheme is most effective in suppressing peak hour congestion and distributing demands over longer time horizon. Also, congestion pricing is found to be more effective when travelers have diversified cost structures than identical cost structures, and congestion is better reduced with heterogeneous traveler composition than with single composition. This is consistent with earlier studies in the literature. In addition, the simulation results indicate that omniscient pricing in general reduces Expected Total Social Cost<(with or without the return of the congestion fee). However, the ultimate benefits of a certain pricing scheme depend on travelers' cost structure as well as the composition of late-tolerant, late-averse and late-neutral travelers in the entire population; extreme situations such as 100% late-averse or 100% late-tolerant traveler composition deserves extra attention when analyzing different pricing schemes.
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Paper provided by University of Minnesota: Nexus Research Group in its series Working Papers with number
000029.
Length: Date of creation: 2006 Date of revision: Handle: RePEc:nex:wpaper:stochasticpricing
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Find related papers by JEL classification: R41 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Transportation: Demand, Supply, and Congestion R42 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government and Private Investment Analysis R48 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government Pricing; Regulatory Policies D10 - Microeconomics - - Household Behavior - - - General D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1990.
"Economics of a bottleneck,"
Journal of Urban Economics,
Elsevier, vol. 27(1), pages 111-130, January.
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