Optimal pricing of endogenous congestion: a disaggregated approach
AbstractWe design and estimate a game theoretic congestion pricing mechanism in which the regulator aims at reducing urban traffic congestion by price discriminating travelers according to their Value Of Time (VOT). Travelers' preferences depend on their observable characteristics, on the endogenous amount of congestion anticipated, on their Marginal Utility (MU) of income and on some unobserved factors. Using a French household survey, we estimate the demand models to simulate different pricing mechanisms. We find that unobserved determinants of transportation demand are significant and are used to measure the anticipated time spent in traffic and the comfort of traveling: diverging from these expectations is felt as more discomfort than if no expectations were formed a-priori. However some of this discomfort is derived from travelers' marginal utility of income: the lost time in traffic is clearly "unpleasant" because of its opportunity cost. When the regulator and the transportation provider share common objectives, we show that a great welfare improvement can be achieved when implementing a homogenous pricing that accurately accounts for travelers VOT.
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Bibliographic InfoPaper provided by UMBC Department of Economics in its series UMBC Economics Department Working Papers with number 09-107.
Length: 37 pages
Date of creation: Apr 2007
Date of revision: Apr 2011
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Postal: UMBC Department of Economics 1000 Hilltop Circle Baltimore MD 21250, USA
Web page: http://www.umbc.edu/economics
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Find related papers by JEL classification:
- R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- D6 - Microeconomics - - Welfare Economics
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