Nonlinear Pricing on Private Roads with Congestion and Toll Collection Costs
AbstractNonlinear 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 InfoPaper provided by University of Alberta, Department of Economics in its series Working Papers with number 2010-3.
Length: 70 pages
Date of creation: 01 Jan 2010
Date of revision:
congestion pricing; two-part pricing; private roads; toll collection costs;
Other versions of this item:
- Wang, Judith Y.T. & Lindsey, Robin & Yang, Hai, 2011. "Nonlinear pricing on private roads with congestion and toll collection costs," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 9-40, January.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
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