Second-best Congestion Pricing Schemes in the Monocentric City

This paper considers second-best congestion pricing in the monocentric city, with endogenous residential density and endogenous labour supply. A spatial general equilibrium model is developed that allows consideration of the three-way interactions between urban density, traffic congestion and labour supply. Congestion pricing schemes are analyzed that are second best ‘by design’ (and not because distortions exist elsewhere in the spatial economy), like cordon charging and flat kilometre charges. Both for Cobb-Douglas utility and for CES utility, the analyses suggest that the relative welfare losses from second-best pricing, compared to first-best pricing, are surprisingly small. *Affiliated to the Tinbergen Institute, Roetersstraat 31, 1018 WB Amsterdam. Key words: Traffic congestion, second-best pricing, urban structure, spatial general equilibrium JEL codes: R41, R48, D62

Time, speeds, flows and densities in static models of road traffic congestion and congestion pricing

This paper deals with some of the features of static models of road traffic congestion that have caused much debate in the literature. It first focuses on the difficulties arising with the backward-bending cost curve defined over traffic flows in the context of `continuous congestion'. The relevance of the backward-bending segment of this curve is questioned by demonstrating that the `equilibria' on this segment of the cost curve are dynamically infeasible. Next, the implications for static models of `peak congestion' are considered. In doing so, attention is paid also to the implicit assumptions, particularly on the nature of scheduling costs, that are necessary to render static models of peak congestion internally consistent. The paper ends with a brief discussion of the implications for dynamic models of peak congestion.

Urban sustainability, agglomeration forces and the technological deus ex machina

This paper addresses the issue of spatial environmental externalities from a spatial general equilibrium perspective. We present a general equilibrium model of an island economy, with one city and a rural hinterland. Apart from market-internal interactions such as those governing trade and locational choice, the small economy considered encompasses a number of spatial external effects. Agglomeration externalities explain why industrial production is concentrated in a city, where land prices are higher than elsewhere. Industrial production however leads to environmental pollution, which negatively affects the quality of life within the city and rural agricultural production elsewhere. The paper explores the welfare properties of market-based spatial general equilibria compared to efficient configurations. The conclusions allow a welfare economic assessment of the currently popular concept of ‘ecological footprints’ from a spatial general equilibrium viewpoint.

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.

Energy policies in spatial systems: A spatial price equilibrium approach with heterogeneous regions and endogenous technologies

This paper presents a framework for analysing spatial aspects of environmental policies in the regulation of trans-boundary externalities. A spatial price equilibrium model for two regions is constructed, where interactions between these regions can occur via trade and transport, via mutual environmental spill-overs due to the externality that arises from production, and via tax competition when the regions do not behave cooperatively. Explicit attention is also given to the additional complications arising from emissions caused by the endogenous transport flows.

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

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

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.