Pricing and Investment Decisions for a Tollway With Possible Route Substitution onto Alternative Congested Roads (original) (raw)
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Toll Competition Among Congested Roads
Topics in Economic Analysis & Policy, 2000
Roads are being franchised to private firms in many countries, raising the issue of regulating the tolls they charge. When there is more than one road to get from one point to another, regulation need not be necessary, since competition may substitute for toll regulation. This paper studies toll competition among private asymmetric roads subject to congestion. We obtain two main results. First, in equilibrium tolls are higher than optimal, that is, there is too little congestion. This happens because road owners internalize the reduction in drivers’ willingness to pay due to congestion, thereby softening competition. It follows that the drawback of private competition is exercise of market power, not excessive congestion as is sometimes conjectured. Second, the distortion becomes smaller as market size and the number of roads grow, even if the density of drivers does not change. In the limit tolls converge to the socially optimal level and are just enough to make each driver interna...
Private toll roads: a dynamic equilibrium analysis
1997
In recent years there has been a surge of interest in private toll roads as an alternative to public free-access road infrastructure. Private toll roads have gained favour for a variety of reasons, including their potential to alleviate traffic congestion, shrinking public funds for road construction and maintenance, and growing acceptance of the user-pay principle. This paper takes the profitability of private toll roads as given, and focuses on their allocative efficiency. The model features one origin and one destination linked by two parallel routes that can differ in capacity and free-flow travel time. Congestion takes the form of queueing. Individuals decide whether to drive, and if so on which route and at what time. Three private ownership regimes are considered: a private road on one route and free access on the other route, competing private roads, and a mixed duopoly with a private road competing with a public toll road. The efficiency gain (measured by social surplus) in each regime is measured relative to the efficiency gain derived from applying first-best optimal tolls on both routes. Private toll roads are generally found to enhance efficiency. The efficiency gain is greater when tolls are varied over time to eliminate queueing, when competing routes are also tolled, when no private road has a dominant fraction of total capacity, and when a private road does not suffer a significant travel time disadvantage. Paradoxically, a mixed duopoly can be less efficient than a private duopoly. Price leadership by a public toll road operator avoids this possibility, although leadership typically yields little efficiency gain.
Economics of Transportation, 2012
Traffic congestion is a bane of modern city life. Transportation economists have long supported road pricing as a tool for controlling congestion and the idea is slowly coming into practice. This paper reviews the theory of congestion pricing and the relationship between optimal congestion tolls and optimal road capacity. It is organized around four questions. Is congestion pricing according to marginal-social-cost principles consistent with covering the costs of road infrastructure? How does road pricing affect optimal road capacity? How does road pricing affect optimal public transportation fares and capacity? Do private toll road operators make socially efficient toll and capacity decisions? The paper concludes with an assessment of long-run trends in travel demand and technology that could alter the evolution of traffic congestion and priorities for road pricing and investment.
The economics of truck toll lanes
2007
Truck-only lanes and tollways have been promoted as a way to combat road congestion, enhance safety and reduce pavement damage. This paper explores one aspect of truck lanes by considering whether there are advantages in separating cars and trucks. The benefits of vehicle separation are found to depend on several factors: the relative volumes of cars and trucks, the congestion delay and safety hazards that each type of vehicle imposes, values of travel time for cars and trucks, and lane capacity indivisibilities. The optimal assignment of vehicles to lanes can be supported using tolls that are differentiated by vehicle type and route. By contrast, lane access restrictions generally cannot support the optimum and may provide no benefit at all.
Trade-Off for Road Pricing Between Transportation Performance and Financial Feasibility
Transportation Research Record, 2005
This study estimates the transportation performance and financial impacts of express toll (ET) lane and high-occupancy toll (HOT) lane concepts, with and without new bus rapid transit (BRT) service. Estimates are made for a prototypical suburban transportation corridor in a major metropolitan area with the use of the Spreadsheet Model for Induced Travel Estimation, Managed Lanes (SMITE-ML), which was enhanced to analyze the conventional build concept with no priced lanes. The analysis demonstrates that in a typical case a HOT alternative may mitigate congestion more cost-effectively than an ET alternative. Combining BRT with ET may make this alternative much more effective, perhaps more effective than a HOT alternative with no BRT. BRT increases the benefits and economic efficiency of both ET and HOT alternatives, but it reduces financial feasibility because of the need for public tax support for transit. ET alternatives tend to be more financially feasible than HOT alternatives primarily because of the additional revenues generated from tolls; under this alternative, HOVs are not exempt from tolls. These conclusions hold up for the case study corridor even under extreme assumptions with regard to demand elasticity and value of time.
Different Policy Objectives of the Road-Pricing Problem: A Game-theoretic Approach
Pricing in Road Transport
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 social planner game) are mathematically formulated and the relationship between players, their payoff functions, and rules of the games are defined. 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 the objective functions may have a non-continuous shape. The main contribution is the two-level separation between the network users and the road authority in terms of their objectives and influences.
Economics of Urban Highway Congestion and Pricing
Transportation Research, Economics and Policy, 1999
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Traffic restraint, road pricing and network equilibrium
Transportation Research Part B: Methodological, 1997
Road pricmg is now being advocated as an el?icient means of managing traffic demand and of meeting other objectives, such as reducing the environmental impact of road traffic and improving public transport. This paper shows how a network toll pattern could be determined so as to reduce network travel demand to a desirable level. The demand between each origin4estination pair is described as a function of the generalized travel cost. When there is no toll charge, higher values of potential demand might cause congestion and queuing at bottleneck links of the road network. Queuing delay at saturated links may grow to choke off enough potential demand to reduce realized demand to the capacity of the network. thus leading to a queuing equilibrium where travel demand and travel cost match each other. In this paper, we first show how an elastic-demand network equilibrium model with queue could be used to determine this demand-~ supply equilibrium. We then seek a link toll pattern to remove the wasteful queuing delay, and/or restrain the realized demand to a desirable level to satisfy environment capacity constraints. We also show that the link toll pattern that could hold the traffic demand to a desirable level is not unique, a bi-level programming method is developed to select the best toll pattern among the feasible solutions based on pre-specified criteria.
Highway pricing and capacity choice in a road network under a build–operate–transfer scheme
Transportation Research Part A-policy and Practice, 2000
It is often argued lately that the private sector should be allowed to build and operate roads in a transportation network at its own expense, in return it should receive the revenue from road toll charge within some years, and then these roads will be transferred to the government. This type of build–operate–transfer (B–O–T) projects is currently fashionable worldwide, especially for developing countries short of funds for road construction. One of the important issues concerning a highway B–O–T project is the selection of the capacity and toll charge of the new road and the evaluation of the relevant benefits to the private investor, the road users and the whole society under various market conditions. This paper deals with the selection and evaluation of a highway project under such a B–O–T scheme. For a given road network with elastic demand, mathematical models are proposed to investigate the feasibility of a candidate project and ascertain the optimal capacity and level of toll charge of the new highway. The response of road users to the new B–O–T project is explicitly considered. The characteristic of the problem is illustrated graphically with a numerical example.