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Measuring Long-Run Price Elasticities in Urban Travel Demand

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  • Donna, Javier D.

Abstract

This paper develops a structural model of urban travel to estimate long-run price elasticities. A dynamic discrete choice demand model with switching costs is estimated, using a panel dataset with public market-level data on automobile and public transit use for Chicago. The estimated model shows that long-run own- (automobile) and cross- (transit) price elasticities are more elastic than short-run elasticities, and that elasticity estimates from static and myopic models are downward biased. The estimated model is used to evaluate the response to a gasoline tax. Static and myopic models mismeasure long-run substitution patterns, and could lead to incorrect policy decisions.

Suggested Citation

  • Donna, Javier D., 2018. "Measuring Long-Run Price Elasticities in Urban Travel Demand," MPRA Paper 90260, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:90260
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    Keywords

    Long-run price elasticities; Dynamic demand travel; Hysteresis;
    All these keywords.

    JEL classification:

    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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