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The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation

  • Small, Kenneth A.
  • Yan, Jia

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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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 49 (2001)
Issue (Month): 2 (March)
Pages: 310-336

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Handle: RePEc:eee:juecon:v:49:y:2001:i:2:p:310-336
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  1. Shmanske, Stephen, 1991. "Price Discrimination and Congestion," National Tax Journal, National Tax Association, vol. 44(4), pages 529-32, December.
  2. Erik T. Verhoef & Kenneth A. Small, 1999. "Product Differentiation on Roads: Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Tinbergen Institute Discussion Papers 99-066/3, Tinbergen Institute.
  3. Bradford, Richard M., 1996. "Pricing, routing, and incentive compatibility in multiserver queues," European Journal of Operational Research, Elsevier, vol. 89(2), pages 226-236, March.
  4. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 34(1), pages 13-35.
  5. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September.
  6. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
  7. 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.
  8. Small, Kenneth A. & Gomez-Ilbanez, Jose A., 1998. "Road Pricing for Congestion Management: The Transition from Theory to Policy," University of California Transportation Center, Working Papers qt8kk909p1, University of California Transportation Center.
  9. Viton Philip A., 1995. "Private Roads," Journal of Urban Economics, Elsevier, vol. 37(3), pages 260-289, May.
  10. Liu, Louie Nan & McDonald, John F., 1998. "Efficient Congestion Tolls in the Presence of Unpriced Congestion: A Peak and Off-Peak Simulation Model," Journal of Urban Economics, Elsevier, vol. 44(3), pages 352-366, November.
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