Road Pricing with Optimal Mass Transit
This paper asks the question, "How should the level of mass transit service be adjusted when road pricing is introduced for a substitute auto mode?" The reference point for the introduction of road pricing is second-best optimization in transit. Because this involves below- marginal-cost pricing in transit, it is efficient for road pricing to be accompanied by an increase in the transit fare and a reduction in service. This runs counter to the usual view of using the toll revenue generated by road pricing to provide a higher level of transit service.
|Date of creation:||31 Jan 2011|
|Date of revision:||15 Apr 2012|
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060723, University of California-Irvine, Department of Economics.
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