IDEAS home Printed from https://ideas.repec.org/p/cdl/uctcwp/qt2sb2x5xp.html
   My bibliography  Save this paper

Product Differentiation on Roads: Constrained Congestion Pricing with Heterogeneous Users

Author

Listed:
  • Verhoef, Erik T.
  • Small, Kenneth A.

Abstract

We explore the properties of various types of public and private pricing on a congested road network, with heterogeneous users and allowing for elastic demand. Heterogeneity is represented by a continuum of values of time. The network allows us to model certain features of real-world significance: pricing restrictions on either complementary or substitute links, as well as interactions between different user groups on shared links (e.g. in city centers). We find that revenue-maximizing pricing, whether restricted or unrestricted; but this difference is mitigated by the product differentiation made possible with heterogeneous users. Product differentiation also produces some unexpected distributional effects: those hurt most by pricing may be people with moderate rather than low values of time, and first-best pricing can cause congestion levels to increase for some users compared to no pricing. Ignoring heterogeneity causes the welfare benefits of a policy close to one currently being used, namely second-best pricing of one of two parallel links, to be dramatically underestimated. Unlike first-best policies, second-best policies are in danger of losing much of their potential effectiveness if heterogeneity is ignored when setting toll levels.

Suggested Citation

  • Verhoef, Erik T. & Small, Kenneth A., 2002. "Product Differentiation on Roads: Constrained Congestion Pricing with Heterogeneous Users," University of California Transportation Center, Working Papers qt2sb2x5xp, University of California Transportation Center.
  • Handle: RePEc:cdl:uctcwp:qt2sb2x5xp
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/2sb2x5xp.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

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


    Cited by:

    1. Ondřej Prchal, 2019. "Public Transport - Effectivity of Costs and a Specific Case Description," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2019(3-4), pages 78-84.
    2. Hyman, G. & Mayhew, L., 2008. "Toll optimisation on river crossings serving large cities," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(1), pages 28-47, January.

    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:cdl:uctcwp:qt2sb2x5xp. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/itucbus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.