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Nonlinear Pricing on Private Roads with Congestion and Toll Collection Costs

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Author Info

  • Lindsey, Robin

    () (University of Alberta, Department of Economics)

  • Wang, Judith

    (University of Alberta, Department of Economics)

  • Yang, Hai

    () (Hong Kong University of Science and Technology)

Abstract

Nonlinear pricing (a form of second-degree price discrimination) is widely used in transportation and other industries but it has been largely overlooked in the road-pricing literature. This paper explores the incentives for a profit-maximizing toll-road operator to adopt some simple nonlinear pricing schemes when there is congestion and collecting tolls is costly. Users are assumed to differ in their demands to use the road. Regardless of the severity of congestion, an access fee is always profitable to implement either as part of a two-part tariff or as an alternative to paying a toll. Use of access fees for profit maximization can increase or decrease welfare relative to usage-only pricing. Hence a ban on access fees could reduce welfare.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2010-3.

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Length: 70 pages
Date of creation: 01 Jan 2010
Date of revision:
Handle: RePEc:ris:albaec:2010_003

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Related research

Keywords: congestion pricing; two-part pricing; private roads; toll collection costs;

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Cited by:
  1. Batarce, Marco & Ivaldi, Marc, 2010. "Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services," TSE Working Papers 10-226, Toulouse School of Economics (TSE), revised Apr 2011.
  2. Russo, Antonio, 2012. "Pricing of Transport Networks, Redistribution and Optimal Taxation," TSE Working Papers 12-353, Toulouse School of Economics (TSE).
  3. Batarce, Marco & Ivaldi, Marc, 2011. "Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services," CEPR Discussion Papers 8416, C.E.P.R. Discussion Papers.

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