Strategic investment and pricing decisions in a congested transport corridor.

This paper studies pricing and investment decisions on a congested transport corridor where the elements of the corridor are controlled by different governments. A corridor can be an interstate highway or railway line, or an inter-modal connection. We model the simplest corridor: two transport links in series, where each of the links is controlled by a different government. Each link is used by transit as well as by local traffic; both links are subject to congestion. We consider a two stage noncooperative game where both governments strategically set capacity in the first stage and play a pricing game in the second stage. Three pricing regimes are distinguished: (i) differentiated tolls between local and transit transport, (ii) one uniform toll on local and transit traffic, and (iii) only the local users can be tolled. Numerical analysis illustrates all theoretical insights. A number of interesting results are obtained. First, transit tolls on the network will be inefficiently high. If only local traffic can be tolled, however, the Nash equilibrium tolls are inefficiently low. Second, raising the toll on transit through a given country by one euro raises the toll on the whole trajectory by less than one euro. Third, higher capacity investment in a given region not only reduces optimal tolls in this region under all pricing regimes but it also increases the transit tolls on the other link of the corridor. Fourth, capacities in the different regions are strategic complements: when one country on the corridor increases transport capacity, it forces the other country to do the same. Fifth, we find interesting interactions between optimal capacities and the set of pricing instruments used: capacity with differentiated tolls is substantially higher than in the case of uniform tolls but overall welfare is lower. Finally, if transit is sufficiently important, it may be welfare improving not to allow any tolling at all, or to only allow the tolling of locals.Investment; Pricing; Decisions; Decision; Transport;

The interaction between tolls and capacity investment in serial and parallel transport networks.

Investment; Serial; Transport; Networks; Working;

Private port pricing and public investment in port and hinterland capacity.

Investment; Pricing; Decisions; Decision; Transport;

How large is the gap between present and efficient transport prices in Europe?

In this paper we analyse the gap between present transport prices and efficient transport prices. Efficient transport prices are those prices that maximise economic welfare, including external costs (congestion, air pollution, accidents). The methodology is applied to six urban and interregional case studies using one common optimal pricing model. The case studies cover passenger as well as freight transport and cover all modes. We find that prices need to be raised most for peak urban passenger car transport and to a lesser extent for interregional road transport. Optimal pricing results for public transport are more mixed. We show that current external costs on congested roads are a bad guide for optimal taxes and tolls: the optimal toll that takes into account the reaction of demand is often less than one third of the present marginal external cost.transport pricing; external costs; social costs; congestion pricing

Second best toll and capacity optimisation in network: solution algorithm and policy implications

This paper looks at the first and second-best jointly optimal toll and road capacity investment problems from both policy and technical oriented perspectives. On the technical side, the paper investigates the applicability of the constraint cutting algorithm for solving the second-best problem under elastic demand which is formulated as a bilevel programming problem. The approach is shown to perform well despite several problems encountered by our previous work in Shepherd and Sumalee (2004). The paper then applies the algorithm to a small sized network to investigate the policy implications of the first and second-best cases. This policy analysis demonstrates that the joint first best structure is to invest in the most direct routes while reducing capacities elsewhere. Whilst unrealistic this acts as a useful benchmark. The results also show that certain second best policies can achieve a high proportion of the first best benefits while in general generating a revenue surplus. We also show that unless costs of capacity are known to be low then second best tolls will be affected and so should be analysed in conjunction with investments in the network

Income effects, cost damping and the value of time: theoretical properties embedded within practical travel choice models

Mackie et al. (Values of travel time savings in the UK. Report to Department for Transport. Institute for Transport Studies, University of Leeds & John Bates Services, Leeds and Abingdon, 2003) proposed an identity relating the value of time (VoT) for commute and leisure travel to income and travel cost, reporting the prevalence of ‘cost damping’ (i.e. the phenomenon where VoT increases as travel cost increases). This identity (or a variant thereof) has been adopted within official methods for estimating VoT in the UK, Switzerland and The Netherlands. The present paper shows that Mackie et al.’s identity: (i) implies linear preferences, not strictly convex preferences as reported by Mackie et al.; (ii) complies with homogeneity and symmetry by construction; (iii) complies with adding-up if and only if VoT is unit elastic with respect to income; (iv) complies with negativity if VoT is unit elastic or greater with respect to income; (v) violates both adding-up and negativity in the case of the 2003 UK national VoT study. We propose alternative identities which comply with adding-up and homogeneity by construction, and offer comparable fit to Mackie et al.’s identity on the UK VoT dataset. We also find that the imposition of adding-up and negativity on Mackie et al.’s identity, through appropriate constraint on model estimation, leads to an increase of around 20% in valuations from the 2003 UK dataset

Understanding valuation of travel time changes: are preferences different under different stated choice design settings?

Stated choice (SC) experiments are the most popular method to estimate the value of travel time changes (VTTC) of a population. In the simplest VTTC experiment, the SC design variables are time changes and cost changes. The levels of these variables create a particular setting from which preferences are inferred. This paper tries to answer the question “do preferences vary with SC settings?”. For this, we investigate the role of the variables used in the SC experiment on the estimation of the set of VTTC (i.e. mean and covariates). Ideally, one would like to observe the same individuals completing different SC experiments. Since that option is not available, an alternative approach is to use a large dataset of responses, and split it according to different levels of the variable of interest. We refer to this as partial data analysis. The estimation of the same model on each sub-sample provides insights into potential effects of the variable of interest. This approach is applied in relation to three design variables on the data for the last national VTTC study in the UK, using state-of-the-art model specifications. The results show several ways in which the estimated set of VTTC can be affected by the levels of SC design variables. We conclude that model estimates (including the VTTC and covariates) are different in different settings. Hence by focussing the survey on specific settings, sample level results will be affected accordingly. Our findings have implications for appraisal and can inform the construction of future SC experiments