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Why Congestion Tolling could be good for the Consumer: The Effects of Heterogeneity in the Values of Schedule Delay and Time on the Effects of Tolling

Author

Listed:
  • Vincent van den Berg

    (VU University Amsterdam)

  • Erik T. Verhoef

    (VU University Amsterdam)

Abstract

In studying congestion tolling, it is important to account for heterogeneity in preferences of drivers, as ignoring it can bias the welfare gains. We analyse the effects of tolling, in the bottleneck model, with continuous heterogeneity in the value of time and schedule delay. The welfare gain of a time-variant toll increases with heterogeneity in the value of schedule delay. With heterogeneity, tolling makes the arrival ordering more efficient, and this lowers scheduling costs. If there is not much more heterogeneity in the value of time than in the value of schedule delay, then first-best tolling decreases the generalised price for most users. In our model, first-best tolling is not most detrimental for the lowest values of time and schedule delay: it raises prices more for users with an average value of schedule delay and a slightly larger value of time. Further, the lowest values of time are among those who gain most from a public pay-lane.

Suggested Citation

  • Vincent van den Berg & Erik T. Verhoef, 2010. "Why Congestion Tolling could be good for the Consumer: The Effects of Heterogeneity in the Values of Schedule Delay and Time on the Effects of Tolling," Tinbergen Institute Discussion Papers 10-016/3, Tinbergen Institute, revised 02 Aug 2012.
    • Handle: RePEc:tin:wpaper:20100016
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    References listed on IDEAS

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    1. Small, Kenneth A. & Yan, Jia, 2001. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," Journal of Urban Economics, Elsevier, vol. 49(2), pages 310-336, March.
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    3. 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.
    4. Small, Kenneth A., 2001. "The Value of Pricing," University of California Transportation Center, Working Papers qt0rm449sx, University of California Transportation Center.
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    Cited by:

    1. van den Berg, Vincent & Verhoef, Erik T., 2011. "Congestion tolling in the bottleneck model with heterogeneous values of time," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 60-78, January.

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    More about this item

    Keywords

    biases in calculated welfare effects; bottleneck model; distributional effects; heterogeneity in the value of schedule delay; heterogeneity in the value of time; second-best tolls.;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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