IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v43y2009i4p445-467.html
   My bibliography  Save this article

Optimal tolls for multi-class traffic: Analytical formulations and policy implications

Author

Listed:
  • Holgun-Veras, Jos
  • Cetin, Mecit

Abstract

This paper puts together an analytical formulation to compute optimal tolls for multi-class traffic. The formulation is comprised of two major modules. The first one is an optimization component aimed at computing optimal tolls assuming a Stackelberg game in which the toll agency sets the tolls, and the equilibrating traffic plays the role of the followers. The optimization component is supported by a set of cost models that estimate the externalities as a function of a multivariate vector of traffic flows. These models were estimated using Taylor series expansions of the output obtained from traffic simulations of a hypothetical test case. Of importance to the paper is the total travel time function estimated using this approach that expresses total travel time as a multivariate function of the traffic volumes. The formulation presented in the paper is then applied to a variety of scenarios to gain insight into the optimality of current toll policies. The optimal tolls are computed for two different cases: independent tolls, and tolls proportional to passenger car equivalencies (PCE). The numerical results clearly show that setting tolls proportional to PCEs leads to lower values of welfare that are on average 15% lower than when using independent tolls, though, in some cases the total welfare could be up to 33% lower. This is a consequence of two factors. First, the case of independent tolls has more degrees of freedom than the case of tolls proportional to PCEs. Second, tolls proportional to PCEs do not account for externalities other than congestion, which is likely to lead to lower welfare values. The analytical formulations and numerical results indicate that, because the total travel time is a non-linear function of the traffic volumes, the marginal social costs and thus the optimal congestion tolls also depend on the traffic volumes for each vehicle class. As a result of this, for the relatively low volumes of truck traffic observed in real life, the optimal congestion tolls for trucks could indeed be either lower or about the same as for passenger cars. This stand in sharp contrast with what is implied in the use of PCEs, i.e., that the contribution to congestion are constant. This latter assumption leads to optimal truck congestion tolls that are always proportional to the PCE values. The comparison of the toll ratios (truck tolls divided by passenger car tolls) for both observed and optimal conditions suggests that the tolls for small trucks are about the right level, maybe a slightly lower than optimal. However, the analysis of the toll ratio for large trucks seems to indicate a significant overcharge. The estimates show that the average observed toll ratio for large trucks is even higher than the maximum optimal toll ratio found in the numerical experiments. This suggests that the tolls for large trucks are set on the basis of revenue generation principles while the passenger car tolls are being set based on a mild form of welfare maximization. This leads to a suboptimal cross-subsidization of passenger car traffic in detriment of an important sector of the economy.

Suggested Citation

  • Holgun-Veras, Jos & Cetin, Mecit, 2009. "Optimal tolls for multi-class traffic: Analytical formulations and policy implications," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(4), pages 445-467, May.
  • Handle: RePEc:eee:transa:v:43:y:2009:i:4:p:445-467
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965-8564(08)00213-9
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Steimetz, Seiji S.C. & Brownstone, David, 2005. "Estimating commuters' "value of time" with noisy data: a multiple imputation approach," Transportation Research Part B: Methodological, Elsevier, vol. 39(10), pages 865-889, December.
    2. Kobayashi, Kiyoshi & Do, Myungsik, 2005. "The informational impacts of congestion tolls upon route traffic demands," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 651-670.
    3. Noland, Robert B. & Quddus, Mohammed A., 2005. "Congestion and safety: A spatial analysis of London," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 737-754.
    4. Brownstone, David & Ghosh, Arindam & Golob, Thomas F. & Kazimi, Camilla & Van Amelsfort, Dirk, 2003. "Drivers' willingness-to-pay to reduce travel time: evidence from the San Diego I-15 congestion pricing project," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(4), pages 373-387, May.
    5. Levinson, David, 2005. "Micro-foundations of congestion and pricing: A game theory perspective," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 691-704.
    6. Layard, Richard, 1977. "The Distributional Effects of Congestion Taxes," Economica, London School of Economics and Political Science, vol. 44(175), pages 297-304, August.
    7. Glazer, Amihai & Niskanen, Esko, 2000. "Which consumers benefit from congestion tolls?," University of California Transportation Center, Working Papers qt33d88115, University of California Transportation Center.
    8. Arnott, Richard & Kraus, Marvin, 1998. "When are anonymous congestion charges consistent with marginal cost pricing?," Journal of Public Economics, Elsevier, vol. 67(1), pages 45-64, January.
    9. Levinson, David & Chang, Elva, 2003. "A model for optimizing electronic toll collection systems," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(4), pages 293-314, May.
    10. Small, K.A. & Kazimi, C., 1994. "On the Costs of Air Pollution from Motor Vehicules," Papers 94-95-3, California Irvine - School of Social Sciences.
    11. Glaister, Stephen & Graham, Daniel J., 2005. "An evaluation of national road user charging in England," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 632-650.
    12. Small, Kenneth A., 1983. "The incidence of congestion tolls on urban highways," Journal of Urban Economics, Elsevier, vol. 13(1), pages 90-111, January.
    13. Chen, Mei & Bernstein, David H., 2004. "Solving the toll design problem with multiple user groups," Transportation Research Part B: Methodological, Elsevier, vol. 38(1), pages 61-79, January.
    14. Brownstone, David & Small, Kenneth A., 2005. "Valuing time and reliability: assessing the evidence from road pricing demonstrations," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(4), pages 279-293, May.
    15. Verhoef, Erik T., 2002. "Second-best congestion pricing in general static transportation networks with elastic demands," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 281-310, May.
    16. Glazer, Amihai, 1981. "Congestion Tolls and Consumer Welfare," Public Finance = Finances publiques, , vol. 36(1), pages 77-83.
    17. Mun, Se-il & Konishi, Ko-ji & Yoshikawa, Kazuhiro, 2005. "Optimal cordon pricing in a non-monocentric city," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 723-736.
    18. Yan, Hai & Lam, William H. K., 1996. "Optimal road tolls under conditions of queueing and congestion," Transportation Research Part A: Policy and Practice, Elsevier, vol. 30(5), pages 319-332, September.
    19. Saleh, Wafaa & Farrell, Séona, 2005. "Implications of congestion charging for departure time choice: Work and non-work schedule flexibility," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 773-791.
    20. Hensher, David A., 2008. "Influence of vehicle occupancy on the valuation of car driver's travel time savings: Identifying important behavioural segments," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(1), pages 67-76, January.
    21. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-260, May.
    22. Zhang, H. M. & Ge, Y. E., 2004. "Modeling variable demand equilibrium under second-best road pricing," Transportation Research Part B: Methodological, Elsevier, vol. 38(8), pages 733-749, September.
    23. Bellei, Giuseppe & Gentile, Guido & Papola, Natale, 2002. "Network pricing optimization in multi-user and multimodal context with elastic demand," Transportation Research Part B: Methodological, Elsevier, vol. 36(9), pages 779-798, November.
    24. Verhoef, Erik T., 2005. "Speed-flow relations and cost functions for congested traffic: Theory and empirical analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 792-812.
    25. Niskanen, Esko, 1987. "Congestion tolls and consumer welfare," Transportation Research Part B: Methodological, Elsevier, vol. 21(2), pages 171-174, April.
    26. Ho, H.W. & Wong, S.C. & Yang, Hai & Loo, Becky P.Y., 2005. "Cordon-based congestion pricing in a continuum traffic equilibrium system," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 813-834.
    27. Andre De Palma & Moez Kilani & Robin Lindsey, 2006. "The Economics of Truck Toll Lanes," ERSA conference papers ersa06p896, European Regional Science Association.
    28. Yang, Hai & Huang, Hai-Jun, 2004. "The multi-class, multi-criteria traffic network equilibrium and systems optimum problem," Transportation Research Part B: Methodological, Elsevier, vol. 38(1), pages 1-15, January.
    29. Olszewski, Piotr & Xie, Litian, 2005. "Modelling the effects of road pricing on traffic in Singapore," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 755-772.
    30. Blythe, P.T., 2005. "Congestion charging: Technical options for the delivery of future UK policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 571-587.
    31. Vold, Arild, 2005. "Optimal land use and transport planning for the Greater Oslo area," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(6), pages 548-565, July.
    32. Lo, Hong K. & Szeto, W.Y., 2005. "Road pricing modeling for hyper-congestion," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 705-722.
    33. de Palma, André & Kilani, Moez & Lindsey, Robin, 2005. "Congestion pricing on a road network: A study using the dynamic equilibrium simulator METROPOLIS," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 588-611.
    34. Szeto, W.Y. & Lo, Hong K., 2006. "Transportation network improvement and tolling strategies: The issue of intergeneration equity," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(3), pages 227-243, March.
    35. Gentile, Guido & Papola, Natale & Persia, Luca, 2005. "Advanced pricing and rationing policies for large scale multimodal networks," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 612-631.
    36. H C W L Williams, 1977. "On the Formation of Travel Demand Models and Economic Evaluation Measures of User Benefit," Environment and Planning A, , vol. 9(3), pages 285-344, March.
    37. Adler, Jeffrey L. & Cetin, Mecit, 2001. "A direct redistribution model of congestion pricing," Transportation Research Part B: Methodological, Elsevier, vol. 35(5), pages 447-460, June.
    38. 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.
    39. Kockelman, Kara M. & Kalmanje, Sukumar, 2005. "Credit-based congestion pricing: a policy proposal and the public's response," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(7-9), pages 671-690.
    40. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sathaye, Nakul & Harley, Robert & Madanat, Samer, 2010. "Unintended environmental impacts of nighttime freight logistics activities," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(8), pages 642-659, October.
    2. Jou, Rong-Chang & Yeh, Yi-Chun, 2013. "Freeway passenger car drivers' travel choice behaviour in a distance-based toll system," Transport Policy, Elsevier, vol. 27(C), pages 11-19.
    3. Guo, Xiaolei & Xu, Da, 2016. "Profit maximization by a private toll road with cars and trucks," Transportation Research Part B: Methodological, Elsevier, vol. 91(C), pages 113-129.
    4. Bigazzi, Alexander Y. & Figliozzi, Miguel A., 2013. "Marginal costs of freeway traffic congestion with on-road pollution exposure externality," Transportation Research Part A: Policy and Practice, Elsevier, vol. 57(C), pages 12-24.
    5. Beziat, Adrien & Koning, Martin & Toilier, Florence, 2017. "Marginal congestion costs in the case of multi-class traffic: A macroscopic assessment for the Paris Region," Transport Policy, Elsevier, vol. 60(C), pages 87-98.
    6. Meng, Qiang & Lu, Zhaoyang, 2017. "Quantitative analyses of highway franchising under build-operate-transfer scheme: Critical review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 102(C), pages 105-123.
    7. Odeck, James, 2017. "Government versus toll funding of road projects – A theoretical consideration with an ex-post evaluation of implemented toll projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 98(C), pages 97-107.
    8. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road supply in networks with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 430-443.
    9. Holguín-Veras, José & Sánchez-Díaz, Iván, 2016. "Freight Demand Management and the Potential of Receiver-Led Consolidation programs," Transportation Research Part A: Policy and Practice, Elsevier, vol. 84(C), pages 109-130.
    10. Sathaye, Nakul & Horvath, Arpad & Madanat, Samer, 2010. "Unintended impacts of increased truck loads on pavement supply-chain emissions," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(1), pages 1-15, January.
    11. Lu, Zhaoyang & Meng, Qiang, 2018. "Impacts of pavement deterioration and maintenance cost on Pareto-efficient contracts for highway franchising," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 113(C), pages 1-21.
    12. Fontes, T. & Pereira, S.R. & Bandeira, J.M. & Coelho, M.C., 2015. "Assessment of the effectiveness of fuel and toll pricing policies in motorway emissions: An ex-post analysis," Research in Transportation Economics, Elsevier, vol. 51(C), pages 83-93.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:43:y:2009:i:4:p:445-467. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Haili He). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.