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Road pricing with optimal mass transit


  • Kraus, Marvin


This paper considers the second-best policy problem that arises when auto travel is priced below its marginal cost and there is a substitute mass transit mode. Using analytical methods, a global comparison is made between the second-best levels of transit service and the fare and their first-best levels. The fact that the results are global permits an application to road pricing not possible with the local results of Kraus (2003).

Suggested Citation

  • Kraus, Marvin, 2012. "Road pricing with optimal mass transit," Journal of Urban Economics, Elsevier, vol. 72(2), pages 81-86.
  • Handle: RePEc:eee:juecon:v:72:y:2012:i:2:p:81-86 DOI: 10.1016/j.jue.2012.04.002

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    References listed on IDEAS

    1. 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.
    2. Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, vol. 62(4), pages 591-604, September.
    3. Ian W. H. Parry & Kenneth A. Small, 2009. "Should Urban Transit Subsidies Be Reduced?," American Economic Review, American Economic Association, vol. 99(3), pages 700-724, June.
    4. Eric Pels & Erik T Verhoef, 2007. "Infrastructure pricing and competition between modes in urban transport," Environment and Planning A, Pion Ltd, London, vol. 39(9), pages 2119-2138, September.
    5. Jonathan Leape, 2006. "The London Congestion Charge," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 157-176, Fall.
    6. Kraus, Marvin, 2003. "A new look at the two-mode problem," Journal of Urban Economics, Elsevier, vol. 54(3), pages 511-530, November.
    7. 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.
    8. 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.
    9. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
    10. Small, Kenneth A. & Yan, Jia, 2001. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," Journal of Urban Economics, Elsevier, vol. 49(2), pages 310-336, March.
    11. Sherman, Roger, 1971. "Congestion Interdependence and Urban Transit Fares," Econometrica, Econometric Society, vol. 39(3), pages 565-576, May.
    12. Kijung Ahn, 2009. "Road Pricing and Bus Service Policies," Journal of Transport Economics and Policy, University of Bath, vol. 43(1), pages 25-53, January.
    13. Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics.
    14. Erik T. Verhoef & Kenneth A. Small, 2004. "Product Differentiation on Roads," Journal of Transport Economics and Policy, University of Bath, vol. 38(1), pages 127-156, January.
    15. Kraus, Marvin & Yoshida, Yuichiro, 2002. "The Commuter's Time-of-Use Decision and Optimal Pricing and Service in Urban Mass Transit," Journal of Urban Economics, Elsevier, vol. 51(1), pages 170-195, January.
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    Cited by:

    1. Kilani, Moez & Proost, Stef & van der Loo, Saskia, 2014. "Road pricing and public transport pricing reform in Paris: Complements or substitutes?," Economics of Transportation, Elsevier, vol. 3(2), pages 175-187.
    2. Wang, Wei (Walker) & Wang, David Z.W. & Zhang, Fangni & Sun, Huijun & Zhang, Wenyi & Wu, Jianjun, 2017. "Overcoming the Downs-Thomson Paradox by transit subsidy policies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 95(C), pages 126-147.
    3. de Palma, André & Kilani, Moez & Proost, Stef, 2015. "Discomfort in mass transit and its implication for scheduling and pricing," Transportation Research Part B: Methodological, Elsevier, vol. 71(C), pages 1-18.
    4. Beaudoin, Justin & Farzin, Y. Hossein & Lin Lawell, C.-Y. Cynthia, 2015. "Public transit investment and sustainable transportation: A review of studies of transit's impact on traffic congestion and air quality," Research in Transportation Economics, Elsevier, vol. 52(C), pages 15-22.
    5. Zhang, Fangni & Yang, Hai & Liu, Wei, 2014. "The Downs–Thomson Paradox with responsive transit service," Transportation Research Part A: Policy and Practice, Elsevier, vol. 70(C), pages 244-263.
    6. Lindsey, Robin, 2012. "Road pricing and investment," Economics of Transportation, Elsevier, vol. 1(1), pages 49-63.
    7. Takayama, Yuki & Kuwahara, Masao, 2016. "Scheduling preferences, parking competition, and bottleneck congestion: A model of trip timing and parking location choices by heterogeneous commuters," MPRA Paper 68938, University Library of Munich, Germany.

    More about this item


    Congestion pricing; Road pricing;

    JEL classification:

    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics


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