The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation
Some road-pricing demonstrations use an approach called "value-pricing", in which travelers can choose between a free but congested roadway. Recent research has uncovered a potentially serious problem for such demonstrations: in certain models, second-best tolls are far lower than those typically charged, and the welfare gains from profit maximization are small or even negative.
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- Shmanske, Stephen, 1991. "Price Discrimination and Congestion," National Tax Journal, National Tax Association, vol. 44(4), pages 529-32, December.
- Erik T. Verhoef & Kenneth A. Small, 1999.
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Tinbergen Institute Discussion Papers
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