The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation
Some road-pricing demonstrations use â€œvalue pricing,â€ in which travelers can choose between a free but congested roadway and a priced roadway. Recent research has uncovered a potentially serious problem for such demonstrations, second-best tolls may be far lower than those typically charged, and from a welfare perspective, the latter may be worse than not pricing at all. That research, however, assumes that all travelers are identical and it therefore neglects the benefits of product differentiation. Using a model with two user groups, we find that accounting for heterogeneity in value of time as important in evaluating constrained policies, and improves the relative performance of policies that offer differential prices.
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- 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.
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- Erik T. Verhoef & Kenneth A. Small, 1999.
"Product Differentiation on Roads: Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership,"
Tinbergen Institute Discussion Papers
99-066/3, Tinbergen Institute.
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- repec:dgr:uvatin:2099066 is not listed on IDEAS
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