Existence of self-financing and Pareto-improving congestion pricing: Impact of value of time distribution
This paper considers a static congestion pricing model in which travelers select a mode from either, driving on highway or taking public transit, to minimize a combination of travel time, operating cost and toll. The focus is to examine how travelers' value of time (VOT), which is continuously distributed in a population, affects the existence of a pricing-refunding scheme that is both self-financing (i.e. requiring no external subsidy) and Pareto-improving (i.e. reducing system travel time while making nobody worse off). A condition that insures the existence of a self-financing and Pareto-improving (SFPI) toll scheme is derived. Our derivation reveals that the toll authority can select a proper SFPI scheme to distribute the benefits from congestion pricing through a credit-based pricing scheme. Under mild assumptions, we prove that an SFPI toll always exists for concave VOT functions, of which the linear function corresponding to the uniform distribution is a special case. Existence conditions are also established for a class of rational functions. These results can be used to analyze more realistic VOT distributions such as log-normal distribution. A useful implication of our analysis is that the existence of an SFPI scheme is not guaranteed for general functional forms. Thus, external subsidies may be required to ensure Pareto-improving, even if policy-makers are willing to return all toll revenues to road users.
Volume (Year): 44 (2010)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eliasson, Jonas & Hultkrantz, Lars & Nerhagen, Lena & Rosqvist, Lena Smidfelt, 2009. "The Stockholm congestion - charging trial 2006: Overview of effects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(3), pages 240-250, March.
- Jonas Eliasson, 2001. "Road pricing with limited information and heterogeneous users: A successful case," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 35(4), pages 595-604.
- Nakamura, Katsuhiko & Kockelman, Kara Maria, 2002. "Congestion pricing and roadspace rationing: an application to the San Francisco Bay Bridge corridor," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(5), pages 403-417, June.
- 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.
- Eliasson, Jonas & Mattsson, Lars-Göran, 2006. "Equity effects of congestion pricing: Quantitative methodology and a case study for Stockholm," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(7), pages 602-620, August.
- 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.
- Small, Kenneth A., 1992.
"Using the Revenues from Congestion Pricing,"
University of California Transportation Center, Working Papers
qt32p9m3mm, University of California Transportation Center.
- Small, Kenneth A., 2001. "Using the Revenues from Congestion Pricing," University of California Transportation Center, Working Papers qt7170x9b0, University of California Transportation Center.
- Ben-Akiva, M. & Bolduc, D. & Bradley, M., 1993. "Estimation of Travel Choice Models with Randomly Distributed Values of Time," Papers 9303, Laval - Recherche en Energie.
- Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-260, May.
- F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, Oxford University Press, vol. 38(4), pages 582-606.
- 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. Full references (including those not matched with items on IDEAS)