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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. 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.
  2. 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.
  3. repec:dgr:uvatin:1999066 is not listed on IDEAS
  4. 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.
  5. Verhoef, E.T. & Small, K.A., 1999. "Product Differentiation on Roads Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Papers 99-00-01, California Irvine - School of Social Sciences.
  6. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer, vol. 34(1), pages 13-35.
  7. Shmanske, Stephen, 1991. "Price Discrimination and Congestion," National Tax Journal, National Tax Association, vol. 44(4), pages 529-32, December.
  8. 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.
  9. Viton Philip A., 1995. "Private Roads," Journal of Urban Economics, Elsevier, vol. 37(3), pages 260-289, May.
  10. 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.
  11. repec:dgr:uvatin:2099066 is not listed on IDEAS
  12. 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.
  13. 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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