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Delayer Pays Principle: Examining Congestion Pricing with Compensation

  • David Levinson


    (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)

  • Peter Rafferty

Despite its virtues, congestion pricing has yet to be widely adopted. This paper explores the issues of equity and use of toll revenue and several possible alternatives. The equity and efficiency problems of conventional (uncompensated) congestion pricing are outlined. Then, several alternatives are discussed and developed. A new compensation mechanism is developed, called the delayer pays principle. This principle ensures that those who arecause delay to others pay a toll to compensate those who are delayed. We evaluate the effectiveness of this idea by simulating alternative tolling approaches and evaluating the results across several measures, including delay, social cost, consumer surplus, and equity. Different tolling approaches can satisfy widely varying policy objectives, thus this principle is applicable in diverse situations. Such a system is viable and can eliminate some common hurdles of congestion pricing while remaining revenue neutral.

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Paper provided by University of Minnesota: Nexus Research Group in its series Working Papers with number 200407.

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Date of creation: 2004
Date of revision:
Publication status: Published in International Journal of Transport Economics 31:3 295-311
Handle: RePEc:nex:wpaper:delayerpays
Contact details of provider: Postal: Dept. of Civil Engineering, 500 Pillsbury Drive SE, Minneapolis, MN 55455
Phone: +01 (612) 625-6354
Fax: +01 (612) 626-7750
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  1. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
  2. Fielding, Gordon J. & Klein, Daniel B., 1993. "How To Franchise Highways," University of California Transportation Center, Working Papers qt79z9x6fs, University of California Transportation Center.
  3. Richard Arnott & Andre de Palma & Robin Lindsey, 1995. "Recent Developments in the Bottleneck Model," Boston College Working Papers in Economics 305., Boston College Department of Economics.
  4. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
  5. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-79, March.
  6. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September.
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