Acceptability of road pricing and revenue use in the Netherlands

It is generally acknowledged that the implementation of other, more efficient, road pricing measures meet public resistance and that acceptability is nowadays one of the major barriers to successful implementation. Despite the fact that politicians and the public regard transport problems as very urgent and important, people do have concerns about road pricing, resulting in low acceptance levels. This paper presents the empirical results of a questionnaire among Dutch commuters regularly facing congestion asking for their opinion (in terms of acceptance) on road pricing measures and revenue use targets. We find that road pricing is in general not very acceptable and that revenue use is important for the explanation of the level of acceptance. Road pricing is more acceptable when revenues are used to replace existing car taxation or to lower fuel taxes. Moreover, personal characteristics of the respondent have an impact on support levels. Higher educated people, as well as respondents with a higher value of time and with higher perceived effectiveness of the measure, seem to find road pricing measures more acceptable than other people. The same holds for people that receive financial support for their commuting costs and for respondents driving many kilometers in a year. When we ask directly for the acceptability of different types of revenue use (not part of a road pricing measure), again abandoning of existing car (ownership) taxes receives most support whereas the general budget is not acceptable.

Private Roads

This paper studies the efficiency impacts of private toll roads in initially untolled networks. The analysis allows for capacity and toll choice by private operators, and endogenizes entry and therewith the degree of competition, distinguishing and allowing for both parallel and serial competition. Two institutional arrangements are considered, namely one in which entry is free and one in which it is allowed only after winning an auction in which patronage is to be maximized. Both regimes have the second-best zero-profit equilibrium as the end-state of the equilibrium sequence of investments. But the auctions regime approaches this end-state more rapidly: tolls are set equal to their second-best zero-profit levels immediately, and capacity additions for the earlier investments are bigger. When discreteness of capacity is relevant and limits the number of investments that can practically be accommodated, the auctions regime may therefore still result in a more efficient end-state, with a higher social surplus, although the theoretical end-state is the same as under free entry

Inside the Queue

This paper develops a continuous-time -continuous-place economic model of road trafficcongestion with a bottleneck, based on car-following theory. The model integrates twoarchetype congestion technologies used in the economics literature: 'static flow congestion',originating in the works of Pigou, and 'dynamic bottleneck congestion', pioneered byVickrey. Because a closed-form analytical solution of the formal model does not exist, itsbehaviour is explored using a simulation model. In a setting with endogenous departure timechoice and with a bottleneck along the route, it is shown that 'hypercongestion' can arise as adynamic -transitional and local- equilibrium phenomenon. Also dynamic toll schedules areexplored. It is found that a toll rule based on an intuitive dynamic and space-varyinggeneralization of the standard Pigouvian tax rule can hardly be improved upon. A naiveapplication of a toll schedule based on Vickrey 's bottleneck model, in contrast, appears toperform much worse and actually even reduces welfare in the numerical model

Transport pricing beyond the social optimum

This chapter reviews the theory of transport pricing under different objectives than the textbook references of first-best optimization of social welfare. We will discuss pricing for profit maximization, pricing by multiple governments, and - albeit briefly - price incentives that are constrained to be positive or budget neutral. Although different objectives naturally lead to different pricing rules, there remain strong conceptual links with insights from the theory of first-best pricing. For example, a profit-maximizing operator has an incentive to internalize congestion externalities, while an extensive example of tax competition produces pricing rules that balance elements from surplus maximizing and profit-maximizing pricing

Manipulable Congestion Tolls

The recent literature on congestion pricing with large agents contains a remarkable inconsistency: though agents are large enough to recognize self-imposed congestion and exert market power over prices, they do not take into account the impact of their own actions on the magnitude of congestion tolls. When large agents are confronted with tolls derived under this parametric assumption but understand the rule used to generate them, the toll system will no longer guide the market to the social optimum. To address this problem, the present paper derives alternate, manipulable toll rules, which are designed to achieve the social optimum when agents anticipate the full impact of their actions on toll liabilities.Pigouvian taxes; Congestion tolls

Different Policy Objectives of the Road Pricing Problem – a Game Theory Approach

Using game theory we investigate a new approach to formulate and solve optimal tolls with a focus on different policy objectives of the road authority. The aim is to gain more insight into determining optimal tolls as well as into the behavior of users after tolls have been imposed on the network. The problem of determining optimal tolls is stated and defined using utility maximization theory, including elastic demand on the travelers’ side and different objectives for the road authority. Game theory notions are adopted regarding different games and players, rules and outcomes of the games played between travelers on the one hand and the road authority on the other. Different game concepts (Cournot, Stackelberg and monopoly game) are mathematically formulated and the relationship between players, their payoff functions and rules of the games are defined for very simplistic cases. The games are solved for different scenarios and different objectives for the road authority, using the Nash equilibrium concept. Using the Stackelberg game concept as being most realistic for road pricing, a few experiments are presented illustrating the optimal toll design problem subject to different pricing policies considering different objectives of the road authority. Results show different outcomes both in terms of optimal tolls as well as in payoffs for travelers. There exist multiple optimal solutions and objective function may have a non- continuous shape. The main contribution is the two-level separation between of the users from the road authority in terms of their objectives and influences.

Value of time, schedule delay and reliability - estimates based on choice behaviour of Dutch commuters facing congestion

This paper presents the results of a large stated choice experiment among Dutch commuters facing congestion. The experiment consisted of a fractional factorial design with 15 different attributes, three alternatives were car specific and the other was always public transport. Various model specifications have been estimated on the collected choice data allowing us to analyse choice behaviour of road users and determine their values of time, schedule delay (both late and early) and reliability (or uncertainty). In this paper we present the estimates of the best-fitting discrete choice models and interpret the results.

Airport Pricing

Conventional economic wisdom suggests that congestion pricing would be an appropriate response to cope with the growing congestion levels currently experienced at many airports. Several characteristics of aviation markets, however, may make naive congestion prices equal to the value of marginal travel delays a non-optimal response. This paper develops a model of airport pricing that captures a number of these features. The model reflects (1) that airlines typically have market power; (2) that part of external travel delays that aircraft impose are internal to an operator; (3) that the airlines' consumers may impose external benefits of increased frequencies upon one-another; (4) that airports need not be regulated by the same authority; and (5) that an individual airline's network will not be exogenous. We present an analytical treatment for an undetermined number of nodes, links and operators in a network of undetermined size and shape, and numerical exercises for a small triangular network. Some main conclusions are that second-best optimal tolls are typically below marginal external congestion costs alone and may even be negative, that pricing may induce changes in network configurations, and that cooperation between regulators need not be stable but that non-cooperation may lead to welfare losses, also when compared to a no-tolling situation

Externalities in Urban Sustainability

This paper studies urban sustainability from the perspective ofexternalities. We develop a general spatialequilibrium model of a monocentric city, in which two types ofexternalities occur. On the one hand, pollution inthe industrial centre leads to a spatially differentiateddeterioration of the environmental quality in the residentialarea. On the other hand, the existence of the city is explained byagglomeration economies, represented as simpleMarshallian external benefits in production. We investigate free-market versus first-best and second-best optimalspatial equilibria, and conclude that the pursuit of environmentalgoals may sometimes come at the expense ofreduced agglomeration economies, but may actually sometimes alsostimulate these economies

A Structural Model of Traffic Congestion

Conventional economic models of traffic congestion assume that therelation between road use and speed is a technical one. In this paper wederive the speed-flow relationship from more fundamental considerationsconcerning driving behaviour. We develop a structural model in which driverschoose their own optimal speed, by trading off various cost aspects of making atrip: time costs, expected accident costs and fuel costs. Since the optimalspeed depends on the presence of other drivers on the road, we can derive a speed flow relationship on the basis of this behaviour. It is demonstrated thatthe relationship between the various cost components should be taken intoaccount in computing the external costs of traffic. For tolls alone, it isdemonstrated that a regulator ignoring the fundamental relation willotherwise fail to set optimal tolls, and will underestimate the efficiencygains of congestion pricing. Moreover, the overall welfare optimum in ourmodel is found to be off the speed-flow function, and off the average andmarginal cost functions derived from it in the conventional approach. This fulloptimum requires tolls to be either accompanied by speed policies, or to beset as a function of speed. Using an empirically calibrated numericalsimulation model, we illustrate these qualitative findings, and attempt to assess their potential empirical relevance