Optimal urban transport pricing with congestion and economies of density
The paper analyses the impact of economies of density on the characteristics of an urban transport system under optimal pricing conditions. Optimal pricing rules are derived for a transport system where bus and car modes are available for peak and offpeak trips. Both modes contribute to congestion. Each demand level for bus trips requires a minimal supply of bus-kilometres. Optimal bus supply exceeds this minimum only when waiting time reductions due to increased service frequency, outweigh congestion costs and bus supply costs (measured at the marginal cost of public funds). An empirical analysis for Brussels and London shows that taking account of economies of density modestly increases the welfare gain from optimising transport prices. Optimal public transport prices are lower when economies of density are taken into account, while optimal car prices are not strongly affected. In case car prices are fixed at the reference level, very low or zero public transport prices produce small welfare gains in some cases.
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