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Nonlinear pricing on private roads with congestion and toll collection costs


  • Wang, Judith Y.T.
  • Lindsey, Robin
  • Yang, Hai


Nonlinear pricing (a form of second-degree price discrimination) is widely used in transportation and other industries but it has been largely overlooked in the road-pricing literature. This paper explores the incentives for a profit-maximizing toll-road operator to adopt some simple nonlinear pricing schemes when there is congestion and collecting tolls is costly. Users are assumed to differ in their demands to use the road. Regardless of the severity of congestion, an access fee is always profitable to implement either as part of a two-part tariff or as an alternative to paying a toll. Use of access fees for profit maximization can increase or decrease welfare relative to usage-only pricing for profit maximization. Hence a ban on access fees could reduce welfare.

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  • Wang, Judith Y.T. & Lindsey, Robin & Yang, Hai, 2011. "Nonlinear pricing on private roads with congestion and toll collection costs," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 9-40, January.
  • Handle: RePEc:eee:transb:v:45:y:2011:i:1:p:9-40

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    References listed on IDEAS

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    Cited by:

    1. Batarce, Marco & Ivaldi, Marc, 2010. "Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services," IDEI Working Papers 659, Institut d'Économie Industrielle (IDEI), Toulouse, revised Apr 2011.
    2. Liu, Zhiyuan & Wang, Shuaian & Meng, Qiang, 2014. "Optimal joint distance and time toll for cordon-based congestion pricing," Transportation Research Part B: Methodological, Elsevier, vol. 69(C), pages 81-97.
    3. Jorge, Diana & Molnar, Goran & de Almeida Correia, Gonçalo Homem, 2015. "Trip pricing of one-way station-based carsharing networks with zone and time of day price variations," Transportation Research Part B: Methodological, Elsevier, vol. 81(P2), pages 461-482.
    4. Rouhani, Omid M. & Niemeier, Debbie & Knittel, Christopher R. & Madani, Kaveh, 2013. "Integrated modeling framework for leasing urban roads: A case study of Fresno, California," Transportation Research Part B: Methodological, Elsevier, vol. 48(C), pages 17-30.
    5. Lindsey, Robin & de Palma, André, 2014. "Cost recovery from congestion tolls with long-run uncertainty," Economics of Transportation, Elsevier, vol. 3(2), pages 119-132.
    6. Wang, Hua & Zhang, Xiaoning, 2016. "Joint implementation of tradable credit and road pricing in public-private partnership networks considering mixed equilibrium behaviors," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 94(C), pages 158-170.
    7. Xinying Fu & Vincent A.C. van den Berg & Erik T. Verhoef, 2017. "Private Road Supply in Networks with Heterogeneous Users," Tinbergen Institute Discussion Papers 17-025/VIII, Tinbergen Institute, revised 12 Dec 2017.
    8. Ahmadi Azari, Kian & Arintono, Sulistyo & Hamid, Hussain & Rahmat, Riza Atiq O.K., 2013. "Modelling demand under parking and cordon pricing policy," Transport Policy, Elsevier, vol. 25(C), pages 1-9.
    9. Antonio Russo, 2015. "Pricing of Transport Networks, Redistribution, and Optimal Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 605-640, October.

    More about this item


    Congestion pricing Two-part pricing Private roads Toll collection costs;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise


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