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Nonlinear Pricing on Private Roads with Congestion and Toll Collection Costs

Author

Listed:
  • Robin Lindsey

    (University of Alberta, Department of Economics)

  • Judith Wang

    (University of Alberta, Department of Economics)

  • Hai Yang

    (Hong Kong University of Science and Technology)

Abstract

Nonlinear pricing (a form of second-degree price discrimination) is widely used in transportation and other industries but it has been largely overlooked in the road-pricing literature. This paper explores the incentives for a profit-maximizing toll-road operator to adopt some simple nonlinear pricing schemes when there is congestion and collecting tolls is costly. Users are assumed to differ in their demands to use the road. Regardless of the severity of congestion, an access fee is always profitable to implement either as part of a two-part tariff or as an alternative to paying a toll. Use of access fees for profit maximization can increase or decrease welfare relative to usage-only pricing. Hence a ban on access fees could reduce welfare.

Suggested Citation

  • Robin Lindsey & Judith Wang & Hai Yang, 2010. "Nonlinear Pricing on Private Roads with Congestion and Toll Collection Costs," Working Papers 2010-03, University of Alberta, Department of Economics.
    • Handle: RePEc:ris:albaec:2010_003
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    File URL: https://sites.ualberta.ca/~econwps/2010/wp2010-03.pdf
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    Cited by:

    1. Farhad Etebari, 2020. "Pricing Competition Under Specific Discrete Choice Models," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(02), pages 1-14, March.
    2. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    3. Chang, Tang-Hsien & Tseng, Jen-Sung & Hsieh, Tung-Hung & Hsu, Yu-Ting & Lu, Ying-Chih, 2018. "Green transportation implementation through distance-based road pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 53-64.
    4. Hörcher, Daniel & Graham, Daniel J., 2020. "MaaS economics: Should we fight car ownership with subscriptions to alternative modes?," Economics of Transportation, Elsevier, vol. 22(C).
    5. Wang, Hua & Zhang, Xiaoning, 2016. "Joint implementation of tradable credit and road pricing in public-private partnership networks considering mixed equilibrium behaviors," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 94(C), pages 158-170.
    6. Lindsey, Robin & de Palma, André, 2014. "Cost recovery from congestion tolls with long-run uncertainty," Economics of Transportation, Elsevier, vol. 3(2), pages 119-132.
    7. Rouhani, Omid M. & Niemeier, Debbie, 2014. "Flat versus spatially variable tolling: A case study in Fresno, California," Journal of Transport Geography, Elsevier, vol. 37(C), pages 10-18.
    8. Batarce, Marco & Ivaldi, Marc, 2010. "Travel Demand Model with Heterogeneous Users and Endogenous Congestion: An application to optimal pricing of bus services," IDEI Working Papers 659, Institut d'Économie Industrielle (IDEI), Toulouse, revised Apr 2011.
    9. Liu, Zhiyuan & Wang, Shuaian & Meng, Qiang, 2014. "Optimal joint distance and time toll for cordon-based congestion pricing," Transportation Research Part B: Methodological, Elsevier, vol. 69(C), pages 81-97.
    10. Jorge, Diana & Molnar, Goran & de Almeida Correia, Gonçalo Homem, 2015. "Trip pricing of one-way station-based carsharing networks with zone and time of day price variations," Transportation Research Part B: Methodological, Elsevier, vol. 81(P2), pages 461-482.
    11. Rouhani, Omid M. & Niemeier, Debbie & Knittel, Christopher R. & Madani, Kaveh, 2013. "Integrated modeling framework for leasing urban roads: A case study of Fresno, California," Transportation Research Part B: Methodological, Elsevier, vol. 48(C), pages 17-30.
    12. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road networks with uncertain demand," Research in Transportation Economics, Elsevier, vol. 70(C), pages 57-68.
    13. Azari, Kian Ahmadi & Arintono, Sulistyo & Hamid, Hussain & Davoodi, Seyed Rasoul, 2013. "Evaluation of demand for different trip purposes under various congestion pricing scenarios," Journal of Transport Geography, Elsevier, vol. 29(C), pages 43-51.
    14. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road supply in networks with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 430-443.
    15. Ahmadi Azari, Kian & Arintono, Sulistyo & Hamid, Hussain & Rahmat, Riza Atiq O.K., 2013. "Modelling demand under parking and cordon pricing policy," Transport Policy, Elsevier, vol. 25(C), pages 1-9.
    16. Antonio Russo, 2015. "Pricing of Transport Networks, Redistribution, and Optimal Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 605-640, October.

    More about this item

    Keywords

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    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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