Economic efficiency of second-best congestion pricing schemes in urban highway systems
This paper examines urban highway congestion pricing in the instance in which it is not possible to levy a congestion toll on a major portion of the urban road system. This case is pertinent because of technical and/or political constraints. The paper uses economic theory of the second best and a simulation model to compare first-best, second-best and no-toll solutions for a model with two routes and two time periods (peak and pre-peak). The main findings from the simulation results are: (1) the second-best scheme is effective but less efficient than the first-best scheme in reallocating traffic volumes; (2) the second-best tolls are appreciably smaller than the first-best tolls; (3) the welfare gains from the second-best policy are much smaller than the welfare gains that are possible with a complete set of first-best tolls. It is also shown that the nature of the simulation results is not sensitive to reasonable cost and demand parameters.
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Volume (Year): 33 (1999)
Issue (Month): 3 (April)
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- Richard Arnott & Andre de Palma & Robin Lindsey, 1985.
"Economics of a Bottleneck,"
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- Arnott, R. & de Palma, A. & Lindsey, R., 1990. "Departure time and route choice for the morning commute," Transportation Research Part B: Methodological, Elsevier, vol. 24(3), pages 209-228, June.
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- Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-79, June.
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