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Optimal Congestion Pricing with Diverging Long-run and Short-run Scheduling Preferences

Listed author(s):
  • Erik (E.T.) Verhoef

    ()

    (VU Amsterdam; Tinbergen Institute, The Netherlands)

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    Recent empirical work has suggested that there is an important distinction between short-run versus long-run scheduling behaviour of commuters, reflected in differences in values of time and schedule delays, as well as in preferred arrival moments, for the short-run versus the long-run problem. Peer et al. (2015) for example find that the average value of time when consumers form their routines in the long-run problem may exceed by a factor 6 the short-run value that governs departure time choice given these routines. For values of schedule delay, in contrast, the short-run value exceeds the long-run value, by a factor 2. And, when forming routines, consumers in fact choose a most preferred arrival time that may deviate from the value they would choose in absence of congestion because a change in routines may mean that shorter delays will be encountered. This paper investigates whether this distinction between short-run and long-run scheduling decisions affect optimal pricing of a congestible facility. Using a stochastic dynamic model of flow congestion for describing short-run equilibria and integrating it with a dynamic model of routine formation, it is found that consistent application of short-run first-best optimal congestion pricing does not optimally decentralize the optimal formation of routines in the long-run problem. A separate instrument, next to road pricing, is therefore needed to optimize routine formation.

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    File URL: http://papers.tinbergen.nl/17077.pdf
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    Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 17-077/VIII.

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    Date of creation: 05 Sep 2017
    Handle: RePEc:tin:wpaper:20170077
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    1. Henderson, J. Vernon, 1981. "The economics of staggered work hours," Journal of Urban Economics, Elsevier, vol. 9(3), pages 349-364, May.
    2. Tseng, Yin-Yen & Verhoef, Erik T., 2008. "Value of time by time of day: A stated-preference study," Transportation Research Part B: Methodological, Elsevier, vol. 42(7-8), pages 607-618, August.
    3. Stefanie Peer & Erik Verhoef & Jasper Knockaert & Paul Koster & Yin-Yen Tseng, 2011. "Long-Run vs. Short-Run Perspectives on Consumer Scheduling: Evidence from a Revealed-Preference Experiment among Peak-Hour Road Commuters," Tinbergen Institute Discussion Papers 11-181/3, Tinbergen Institute, revised 25 Aug 2014.
    4. Peer, Stefanie & Verhoef, Erik T., 2013. "Equilibrium at a bottleneck when long-run and short-run scheduling preferences diverge," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 12-27.
    5. Mun, Se-il, 1994. "Traffic jams and the congestion toll," Transportation Research Part B: Methodological, Elsevier, vol. 28(5), pages 365-375, October.
    6. Henderson, J. V., 1974. "Road congestion : A reconsideration of pricing theory," Journal of Urban Economics, Elsevier, vol. 1(3), pages 346-365, July.
    7. Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-479, June.
    8. Erik T. Verhoef, 2000. "articles: The implementation of marginal external cost pricing in road transport Long run vs short run and first-best vs second-best," Papers in Regional Science, Springer;Regional Science Association International, vol. 79(3), pages 307-332.
    9. Small, Kenneth A., 2012. "Valuation of travel time," Economics of Transportation, Elsevier, vol. 1(1), pages 2-14.
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