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Dynamic road pricing and the value of time and reliability

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  • Daniel A. Brent
  • Austin Gross

Abstract

High Occupancy Toll (HOT) lanes that use dynamic pricing to manage congestion and generate revenue are increasingly popular. In this paper, we estimate the behavioral response of drivers to dynamic pricing in an HOT lane. The challenge in estimation lies in the simultaneity of price and demand: the structure of dynamic tolling ensures that prices increase as more drivers enter the HOT lane. Prior research has found that higher prices in HOT lanes increase usage. We find that after controlling for simultaneity HOT drivers instead respond to tolls in a manner consistent with economic theory. The average response to a 10 percent increase in the toll is a 1.6 percent reduction in usage. Drivers primarily value travel reliability over time savings, although there is heterogeneity in the relative values of time and reliability based on time of day and destination to or from work. The results highlight the importance of both controlling for simultaneity when estimating demand for dynamically priced toll roads and treating HOT lanes with dynamic prices as a differentiated product with bundled attributes.

Suggested Citation

  • Daniel A. Brent & Austin Gross, 2018. "Dynamic road pricing and the value of time and reliability," Journal of Regional Science, Wiley Blackwell, vol. 58(2), pages 330-349, March.
    • Handle: RePEc:bla:jregsc:v:58:y:2018:i:2:p:330-349
    DOI: 10.1111/jors.12362
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    1. Beland, Louis-Philippe & Brent, Daniel A., 2018. "Traffic and crime," Journal of Public Economics, Elsevier, vol. 160(C), pages 96-116.
    2. Brent, Daniel & Beland, Louis-Philippe, 2020. "Traffic congestion, transportation policies, and the performance of first responders," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    3. Louis-Philippe Beland & Daniel A. Brent, 2018. "Traffic and the Provision of Public Goods," Departmental Working Papers 2018-04, Department of Economics, Louisiana State University.
    4. Rossetti, Tomás & Broaddus, Andrea & Ruhl, Melissa & Daziano, Ricardo, 2023. "Commuter preferences for a first-mile/last-mile microtransit service in the United States," Transportation Research Part A: Policy and Practice, Elsevier, vol. 167(C).
    5. Antonio Bento & Kevin Roth & Andrew Waxman, 2024. "The Value of Urgency: Evidence from Real-Time Congestion Pricing," Journal of Political Economy Microeconomics, University of Chicago Press, vol. 2(4), pages 786-851.
    6. Herzog, Ian, 2024. "Microgeographic speed, reliability, and traffic externalities," Economics of Transportation, Elsevier, vol. 39(C).
    7. Li, Zheng & Hensher, David A. & Rose, John M., 2010. "Willingness to pay for travel time reliability in passenger transport: A review and some new empirical evidence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(3), pages 384-403, May.

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