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Too Expensive to Meter: The influence of transaction costs in transportation and communication

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Author Info

  • David Levinson

    ()
    (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)

  • Andrew Odlyzko

    (Digital Technology Center, University of Minnesota)

Abstract

Technology appears to be making fine-scale charging (as in tolls on roads that depend on time of day or even on current and anticipated levels of congestion) increasingly feasible. And such charging appears to be increasingly desirable, as traffic on roads continues to grow, and costs and public opposition limit new construction. Similar incentives towards fine-scale charging also appear to be operating in communications and other areas, such as electricity usage. Standard economic theory supports such measures, and technology is being developed and deployed to implement them. But their spread is not very rapid, and prospects for the future are uncertain. This paper presents a collection of sketches, some from ancient history, some from current developments, that illustrate the costs that charging imposes. Some of those costs are explicit (in terms of the monetary costs to users, and the costs of implementing the charging mechanisms). Others are implicit, such as the time or the mental processing costs of users. These argue that the case for fine-scale charging is not unambiguous, and that in many cases may be inappropriate.

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File URL: http://nexus.umn.edu/Papers/TooExpensiveToMeter.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by University of Minnesota: Nexus Research Group in its series Working Papers with number 200802.

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Length: 24 pages
Date of creation: Feb 2007
Date of revision: Feb 2007
Publication status: Published in Philosophical Transactions of the Royal Society A: Mathematical Physical and Engineering Sciences 366(1872) pp 2033Ð2046, doi:10.1098/rsta.2008.0022
Handle: RePEc:nex:wpaper:tooexpensivetometer

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Keywords: transportation; communication; transaction costs; collection costs;

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References

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  1. FitzRoy, Felix & Smith, Ian, 1999. "Season Tickets and the Demand for Public Transport," Kyklos, Wiley Blackwell, vol. 52(2), pages 219-38.
  2. Mackie, Peter, 2005. "The London congestion charge: A tentative economic appraisal. A comment on the paper by Prud'homme and Bocajero," Transport Policy, Elsevier, vol. 12(3), pages 288-290, May.
  3. Amy Finkelstein, 2007. "E-ZTax: Tax Salience and Tax Rates," NBER Working Papers 12924, National Bureau of Economic Research, Inc.
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  5. McCarthy Patrick & Tay Richard, 1993. "Economic Efficiency vs Traffic Restraint: A Note on Singapore's Area License Scheme," Journal of Urban Economics, Elsevier, vol. 34(1), pages 96-100, July.
  6. Bogart, Dan, 2005. "Turnpike trusts and the transportation revolution in 18th century England," Explorations in Economic History, Elsevier, vol. 42(4), pages 479-508, October.
  7. Odlyzko Andrew, 2004. "The Evolution of Price Discrimination in Transportation and its Implications for the Internet," Review of Network Economics, De Gruyter, vol. 3(3), pages 1-24, September.
  8. Bogart, Dan, 2005. "Turnpike Trusts, Infrastructure Investment, and the Road Transportation Revolution in Eighteenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 65(02), pages 540-543, June.
  9. Prud'homme, Rémy & Bocarejo, Juan Pablo, 2005. "The London congestion charge: a tentative economic appraisal," Transport Policy, Elsevier, vol. 12(3), pages 279-287, May.
  10. Coase, R H, 1974. "The Lighthouse in Economics," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 357-76, October.
  11. Anna Matas, 2003. "Demand and revenue implications of an integrated public transport policy. The case of," Working Papers wpdea0304, Department of Applied Economics at Universitat Autonoma of Barcelona.
  12. Odlyzko, Andrew, 2000. "The Internet and other networks: utilization rates and their implications," Information Economics and Policy, Elsevier, vol. 12(4), pages 341-365, December.
  13. Hutlkrantz, Lars & Armelius, Hanna, 2005. "The Politico-Economic Link Between Public Transport And Road Pricing: An Ex-Ante Study Of The Stockholm Road-Pricing Trial," Working Papers 2005:8, Örebro University, School of Business.
  14. David Levinson, 2001. "Why States Toll: An Empirical Model of Finance Choice," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(2), pages 223-237, May.
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Citations

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Cited by:
  1. Benjamin Edelman, 2009. "Priced and Unpriced Online Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 21-36, Summer.
  2. Lindsey, Robin & Wang, Judith & Yang, Hai, 2010. "Nonlinear Pricing on Private Roads with Congestion and Toll Collection Costs," Working Papers 2010-3, University of Alberta, Department of Economics.
  3. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1501-1526.
  4. Nikolas Geroliminis & David Levinson, 2008. "Cordon pricing consistent with the physics of overcrowding," Working Papers 000038, University of Minnesota: Nexus Research Group.

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