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Optimal pricing of endogenous congestion: a disaggregated approach

We design and estimate a game theoretic congestion pricing mechanism in which the regulator aims at reducing traffic congestion by discriminating travelers according to their willingness to travel on the network. He knows that travelers learn about their environment, that their preferences are affected by the reputation of each available mode of transportation and that congestion can be seen as a Bayesian game in which travelers impose externalities on each other. We derive individual optimal fares depending on each traveler's valuation of transportation. Welfare simulation results based on a French household survey show that the travelers' perception of the mode of transportation and income sensitivity differences are important determinants of welfare improvement.

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File URL: http://www.umbc.edu/economics/wpapers/wp_09_107.pdf
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Paper provided by UMBC Department of Economics in its series UMBC Economics Department Working Papers with number 09-107.

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Length: 37 pages
Date of creation: Apr 2007
Date of revision: 17 Jul 2009
Handle: RePEc:umb:econwp:09107
Contact details of provider: Postal: UMBC Department of Economics 1000 Hilltop Circle Baltimore MD 21250, USA
Phone: 410-455-2160
Fax: 410-455-1054
Web page: http://www.umbc.edu/economics

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  1. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  2. Small, Kenneth A. & Gomez-Ibanez, Jose A., 1999. "Urban transportation," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 46, pages 1937-1999 Elsevier.
  3. Small, K.A. & Yan, J., 1999. "The Value of "Value Princing" of Roads: Second-Best Pricing and Product Differentiation," Papers 99-00-02, California Irvine - School of Social Sciences.
  4. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
  5. Cremer, Jacques, 2000. "Network externalities and universal service obligation in the internet," European Economic Review, Elsevier, vol. 44(4-6), pages 1021-1031, May.
  6. Richard Arnott & Andre de Palma & Robin Lindsey, 1993. "The Welfare Effects Of Congestion Tolls With Heterogeneous Commuters," Boston College Working Papers in Economics 231, Boston College Department of Economics.
  7. Viauroux, Christelle, 2007. "Structural estimation of congestion costs," European Economic Review, Elsevier, vol. 51(1), pages 1-25, January.
  8. Hanemann, W Michael, 1984. "Discrete-Continuous Models of Consumer Demand," Econometrica, Econometric Society, vol. 52(3), pages 541-61, May.
  9. Cremer, Jacques & Hariton, Cyril, 1999. "The Pricing of Critical Applications in the Internet," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 281-310, December.
  10. 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.
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