Price-based regulation of oligopolistic markets under discrete choice models of demand

We propose a framework to find optimal price-based policies to regulate markets characterized by oligopolistic competition and in which consumers make a discrete choice among a finite set of alternatives. The framework accommodates general discrete choice models available in the literature in order to capture heterogeneous consumer behavior. In our work, consumers are utility maximizers and are modeled according to random utility theory. Suppliers are modeled as profit maximizers, according to the traditional microeconomic treatment. Market competition is modeled as a non-cooperative game, for which an approximate equilibrium solution is sought. Finally, the regulator can affect the behavior of all other agents by giving subsidies or imposing taxes to consumers. In transport markets, economic instruments might target specific alternatives, to reduce externalities such as congestion or emissions, or specific segments of the population, to achieve social welfare objectives. In public policy, different agents have different individual or social objectives, possibly conflicting, which must be taken into account within a social welfare function. We present a mixed integer optimization model to find optimal policies subject to supplier profit maximization and consumer utility maximization constraints. Then, we propose a model-based heuristic approach based on the fixed-point iteration algorithm that finds an approximate equilibrium solution for the market. Numerical experiments on an intercity travel case study show how the regulator can optimize its decisions under different scenarios.

     

Valuation of road projects with uncertain outcomes

This is a practical implementation of a multicriteria methodology developed to assess the risk involved in investment or policy projects. It is based on the specification of a non-linear, but piecewise linear, additive utility function, where the partial utility functions are specified as recursive exponential functions of only one curvature parameter. This allows for a reduction of the quantity of information necessary to build the utility function in a context of uncertainty. It is introduced in an aggregation model whereby the partial utility functions are built separately through a specific questioning process. The methodology is applied to the selection of road infrastructure projects of the Walloon Region in Belgium with several experts and civil servants from the Transport Ministry whose individual utility functions are derived. Software called MUSTARD is used, which stepwise and interactively helps the decision-makers to formulate the problem, build the criteria's distributions and state their preferences. The projects are ranked according to their rate of return computed on the basis of the projects' certain equivalent money values.     

Preference Heterogeneity and Willingness to Pay for Travel Time Savings

We examined different model specifications to detect the presence of preference heterogeneity in a mode choice context. The specification that worked best allows for both systematic and random variations in tastes, with parameters obtained at the individual level using Bayesian methods. Subjective values of travel time (SVT) and expected individual compensated variation were derived and aggregated to obtain measures of social welfare. Results suggest that the benefit measures, both at the individual and at the social level, are sensitive to preference heterogeneity assumptions. SVT and welfare changes derived from travel time reductions could be underestimated if the traditional assumption of taste homogeneity is made (we detected differences up to 30% in both types of measures). We also obtained an empirical value for the error made when evaluating changes in social welfare using an approximation of the expected individual compensated variation (expressed as a function of individual SVT) rather than its exact expression.     

A microeconomic interpretation for the system optimal traffic assignment problem with nonadditive path cost

Using a Bergson–Samuelson welfare function, we outline a microeconomic interpretation of the effects of the non-linearity in the time/cost relationship for travellers in a congested transport network. It is demonstrated that a marginal cost traffic flow assignment following Wardrop's second principle, although it minimizes the total cost of a transport network, may reduce social welfare compared to the market equilibrium assignment based on Wardrop's first principle. A welfare-maximizing assignment model is presented and used to show that if the travellers' utility functions are linear, the assignment that maximizes social welfare will be the same as the assignment that minimizes total network cost, but if users' utility functions are non-linear (reflecting the traditional non-satiation and diminishing marginal utility axioms), the two assignments will be different. It is further shown that the effects of this non-linearity are such that a welfare-maximizing assignment will meet with less user resistance than a minimum total network cost assignment.     

集聚经济视角下轨道交通投资对城市系统均衡的影响

随着城镇化进程加快,城市规模增加所带来的集聚效应和交通拥堵等负外部性之间的矛盾越来越突出,优化城市交通基础设施建设是缓解该矛盾的重要举措。本文同时考虑了集聚经济和交通拥挤两种外部性,构建并求解了一个两区域城市空间结构模型,分三种情况探究了轨道交通的投资引入和道路容量的优化对城市规模和城市空间结构均衡的影响。结果表明,轨道交通的投资引入能够增加城市人口规模和社会福利,使城市结构更加紧凑。但是,随着集聚经济水平的提高,城市规划者应逐步完善公交配套设施,以降低公交拥挤成本,提高公交出行分担率;还应制定相应的福利政策,避免由于个体效用下降而导致人口流出。     

Evaluation of driver satisfaction of travel information on variable message signs using fuzzy aggregation

Driver satisfaction regarding travel information provided by variable message signs (VMS), which are part of the Nam‐Mountain Tunnel ATIS, was evaluated using fuzzy aggregation. Application of fuzzy aggregation to analyze driver satisfaction allows one to represent the variability and complexity of human perception with great fidelity. A fuzzy weighted average using two sets of fuzzy membership functions was applied to evaluate individual satisfactions of delay and travel time information provided. Then, those individual satisfactions were aggregated to estimate the driver group's overall satisfaction. The evaluated overall satisfaction was 0.65 for delay information and 0.63 for travel time information. Through these results, it was found that users of the travel information provided by the VMS in the Nam‐Mountain Tunnel ATIS were somewhat satisfied with the service quality. Those overall satisfactions were compared with a conventional weighted average and traffic operational effects to demonstrate the usefulness of the developed fuzzy method.     

Welfare effects of congestion pricing in Singapore

This paper examines the Singapore Area License Scheme. Changes in scheduling and choices of transportation mode by commuters are discussed. Although the toll is shown to reduce travel times for many commuters, many commuters are shown to incur scheduling costs as a result of the toll. Using estimated parameters of an indirect utility function, welfare functions are computed to compare welfare levels prior to, and just after, the toll was put into place. The evidence suggests that the toll may have reduced welfare.     

Social welfare analysis of investment public–private partnership approaches for transportation projects

This paper has two objectives: (i) to introduce a new approach in order to gain widespread support for road pricing; and (ii) to develop a detailed social welfare analysis for road pricing schemes. We first describe our novel approach that stimulates public support for road pricing, which we refer to as an investment public–private partnership, or IP3. This approach returns a significant portion of the economic value created by road pricing back to the citizens who own the newly priced facility. We then present a social welfare framework that estimates the benefits and costs of using the IP3 approach on an urban transportation network. A P3 project’s impact on overall social welfare provides a more comprehensive evaluation criterion than the often-used Value for Money (VfM) analysis. Apart from several theoretical studies, a detailed social welfare analysis that includes all major P3 project stakeholders is absent from the literature. We use Fresno, California as our case study in order to conduct a welfare analysis on IP3s. Our results show that system-optimal tolling favors average users, but that government—and consequently taxpayers—should pay for costly tolling systems (negative profits). In contrast, unlimited profit-maximizing tolls raise substantial profits for government, for the infrastructure’s citizen-owners, and for the private sector, but the average user is worse off. From a social-welfare perspective, one should search for a Pareto improvement under which all major stakeholders are better off. Our estimates indicate that a mixed public and private tolling scheme offers such an improvement.     

Should subsidies to urban passenger transport be increased? A spatial CGE analysis for a German metropolitan area

In many countries passenger transport is significantly subsidized in a variety of ways for various reasons. The objective of this paper is to examine efficiency, distributional, environmental (CO₂ emissions) and spatial effects of increasing different kinds of passenger transport subsidies discriminating between household types, travel purposes and travel modes. The effects are calculated by applying a numerical spatial general equilibrium approach calibrated to an average German metropolitan area. In extension to most studies focusing on only one kind of subsidy, we compare the effects of different transport subsidies within the same unified framework that allows to account for two features not yet considered simultaneously in studies on transport subsidies: endogenous labor supply and location decisions. Furthermore, congestion, travel mode choice, travel related CO₂ emissions and institutional details regarding the tax system in Germany are taken into account. The results suggest that optimal subsidy levels are either small or even zero. While subsidizing public transport is welfare enhancing, subsidies to urban road traffic reduce aggregate urban welfare. Concerning the latter it is shown that making investments in urban road infrastructure capacity or reducing gasoline taxes may even be harmful to residents using predominantly automobile. In contrast, pure commuting subsidies hardly affect aggregate urban welfare, but distributional effects are substantial. All policies cause suburbanization of city residents and (except for subsidizing public transport) contribute to urban sprawl by raising the spatial imbalance of residences and jobs but the effect is relatively small. In addition, the policies induce a very differentiated pattern regarding distributional effects, benefits of landowners and environmental effects.     

Things planners believe in,and things they deny

The paper examines the economic theory of consumer behavior from the Modern Psychoanalytic point of view with a metaphor of (transport) planning as a backdrop. It is claimed that the utility maximization principle of economic theory, no matter how broadly interpreted, does not envelop the motivation of human behavior and that the economic explanation of the aims of human behavior, which disregards the "dark side" of man, will result in narrowly conceived plans and policies.The application of economic theory, and other social sciences, to public policy has led to disjointedness of data collection, method of analysis, and planning and implementation. This, combined with a tautological behavioral theory, has made the current planning and public policy procedures self-verifying, and issues an invitation for a new theoretical approach which is comprehensive, does not ignore complexity and the large "error term", and appreciates the unity of data collection, method of investigation, and process of implementation.It is argued that unsatisfactory performance of the transport system, large errors inherent in data and models, the inability of extant transportation planning and policy to address key issues successfully, the environmental problem, and the value of the individual all call for new kinds of skills from the planners and policy makers.Freud's dualistic formulation of instinctual drives -- the life and death instincts -- is used as the new framework of explanation. This theory is seen to offer a convincing, more realistic and deeper understanding of the forces motivating human behavior, and one which is more in accordance with observable facts. If applied, the theory will lead to significantly different planning processes and to a profoundly different approach to public policy.     

Subsidized vehicle acquisition and earned income in the transition from welfare to work

Availability and affordability of reliable transportation – either through public transportation or individual ownership of automobiles – appears necessary to support a successful transition from welfare to work. One approach adopted by state and local governments is to subsidize vehicle acquisition by welfare recipients in transition. To date there are no empirical studies that analyze the impacts or effectiveness of these vehicle subsidy programs. The objective of this study is to examine the extent to which participation in a small-scale vehicle donation-and-sales program in Vermont increases earned income by individuals in transition from welfare to work. Using reduced-form random effects and censored regression models to account for the simultaneity of decisions to work and participate in welfare programs, we examine the impacts of this vehicle acquisition program for a small group of individuals. Our analyses indicate that the program results in a statistically significant increase in both earned income and the probability of employment.     

Renegotiating PPP Contracts: Reinforcing the ‘P' in Partnership

Abstract

The issue of renegotiation is becoming increasingly important as a tool to address uncertainty of public private partnership (PPP) projects and as a mechanism to restore its economic and financial equilibrium. This paper aims to understand how and why renegotiations occur in long-lasting PPP projects and what are the pros and cons of the renegotiation. We depart from a literature review on contract incompleteness and on the determinant factors for the renegotiation of infrastructure concessions. To illustrate the discussion, the case studies of nine European PPP projects are analysed by examining the specific exogenous and endogenous determinant factors that conduce to renegotiating contracts. The implications of contractual renegotiations are explained and summarized through a comparison of our case studies with literature. Although renegotiation, per se, is not a solution for the successful implementation of PPP projects, our findings reinforce the idea of contractual flexibility as a tool that allows adapting to uncertainty. Moreover, effective communication mechanisms allow a better response to unforeseen events, reinforcing the partners’ commitment to deliver a win–win project.     

Measuring community reaction to urban transportation impacts using Von Neumann‐Morgenstern utility theory

This paper attempts to measure the impacts of urban transportation system improvements or changes on the community. The community's perceptions of the impacts are represented by its utilities (or disutilities) over various ranges of values of the multiple attributes representing these impacts. The utility technique used in the evaluation is based upon von Neumann‐Morgenstern (vN‐M, 1947) Utility Theory, and is applied using Raiffa's (1970) Fractile Method.

The paper specifically applies the technique to model the perceptions of five subgroups within a community to the impact of a new light rail transit system that is being incorporated in the transportation system of the City of Calgary.

Results of the modeling indicate explicitly how the community changes its perception over ranges of values of the attributes evaluated. Biases of various subgroups within the community over these attributes are also shown. Statistical tests indicate that aggregated utility perceptions can represent the utility perceptions of the individual subgroups quite reasonably.     

Integrating mesoscopic dynamic traffic assignment with agent-based travel behavior models for cumulative land development impact analysis

A number of approaches have been developed to evaluate the impact of land development on transportation infrastructure. While traditional approaches are either limited to static modeling of traffic performance or lack a strong travel behavior foundation, today’s advanced computational technology makes it feasible to model an individual traveler’s response to land development. This study integrates dynamic traffic assignment (DTA) with a positive agent-based microsimulation travel behavior model for cumulative land development impact studies. The integrated model not only enhances the behavioral implementation of DTA, but also captures traffic dynamics. It provides an advanced yet practical approach to understanding the impact of a single or series of land development projects on an individual driver’s behavior, as well as the aggregated impacts on the demand pattern and time-dependent traffic conditions. A simulation-based optimization (SBO) approach is proposed for the calibration of the modeling system. The SBO calibration approach enhances the transferability of this integrated model to other study areas. Using a case study that focuses on the cumulative land development impact along a congested corridor in Maryland, various regional and local travel behavior changes are discussed to show the capability of this tool for behavior side estimations and the corresponding traffic impacts.     

Managing Traffic by Privatization of Road Capacity: A Property Rights Approach

Abstract

Road congestion remains a serious problem, despite all the efforts to limit road use and to manage growing road traffic volumes. Economic approaches (such as pricing) are introduced based on traditional welfare economic theory. Although they are sometimes very successful, the magnitude of traffic issues also requires alternative and unconventional approaches. Perhaps a more innovative perspective is needed. The paper discusses an alternative economic approach starting from property rights theory. It is translated in transport systems in concepts of infrastructure capacity slot management, where slots are dynamically priced and exclusively allocated to individual users. Debates and practices regarding this approach in air traffic and rail traffic are further developed than in the field of road traffic. The paper aims to explore the potential benefits and disadvantages of the property rights approach for road traffic. Attention is paid to major institutional and technical conditions. The conclusion is that the approach theoretically has clear advantages and seems technologically feasible. Nevertheless, serious political and institutional issues have to be solved first.     

Estimating choice probabilities among nested alternatives

In several travel choice situations (e.g. automobile ownership level and trip frequency) the alternatives available to an individual randomly chosen from the population exhibit some internal choice-related ranking: the choice of a given alternative implies that all lower-ranked alternatives have been chosen. Such alternatives are referred to as “nested”. This paper presents a model for estimating choice probabilities among nested alternatives. The model is devised from the well known logit model and uses existing logit maximum-likelihood estimation techniques (and computer packages). The approach is shown to be more attractive than the multinomial logit and linear regression models, from a theoretical point of view, yet cheaper than the multinomial probit model. The model is developed in a disaggregate, utility maximization framework. An example application, estimating probabilities of trip frequencies by elderly individuals is presented.     

Efficiency of European Funds in the Accession Countries: The Case of Transport Infrastructure Investments in Latvia

ABSTRACT

A transport initiative, like any kind of public action, has an impact on the monetary cost, time cost, efficiency and comfort of the transportation of goods and people, in particular transport infrastructure investments. All such initiatives are subject to cost benefit analyses at the national and EU level to know whether the present value of total net benefits including environmental impacts exceeds their cost. However, several important policy issues remain unresolved in standard evaluation procedures. One issue is whether the so-called direct measurement of user benefit, which consists of quantifying changes in surplus of the users of the transport system, captures all welfare generated in the economy. Another issue is how the gains (or possibly losses) of a transport initiative are distributed among regions. The aim of this article is to perform a systematic and quantitative analysis of the socio-economic and spatial impacts of alternative transport investments by carrying out scenario simulations in order to improve the understanding of the impact of transportation policies on the short- and long-term spatial development in Latvia. The general result from the scenario simulations is that rail projects seem to be more effective in terms of promoting regional economic activity than road projects.     

The role of accessibility in basic transportation choice behavior

Accessibility measures reflect the level of service provided by transportation systems to various locations. Basic transportation choice behavior is defined to include those decisions of how many automobiles to own and how many trips to which destinations to make by automobile and by public transit. Here, these decisions are assumed to be made jointly by urban households and are conditional upon residential location decisions. It is the purpose of this paper to explore the role of accessibility as a causal factor in such basic transportation choice behavior.An economic utility theory model of choice behavior is postulated in which the benefits from making trips to specific destinations are reflected by measures of destination attraction. Through determination of utility-maximizing trip frequencies, indirect utility functions are developed which include accessibility concepts. Behavioral implications of these concepts are proposed and contrasts are drawn to accessibility measures used in conventional segregated models of trip distribution, modal choice, and automobile ownership.Sensitivity analyses of alternative empirical definitions of accessibility in the choice model are conducted using data from the Detroit Regional Transportation and Land Use Study — covering counties in southeastern Michigan. These analyses employ a multinomial logit estimation technique and focus on definitions of trip attraction. Results of these analyses indicate that more complicated attraction measures can be replaced by measures involving the proportion of either urban area population or urban area employment within a traffic analysis zone. Also, evidence is found that decision-makers in the case study area consider trips of up to 60 or even 90 minutes duration when evaluating accessibilities offered by alternative public and private transportation systems.     

How does environmental concern influence mode choice habits? A mediation analysis

Starting from the intuition that people with high environmental concern have a better perception of public transport and therefore a better perception of the utility of public transport, we construct a theoretical model in which the effect of environmental concern on mode choice habits is mediated by the indirect utility of travel. Travel procures the direct utility of providing access to activities, but it also offers an indirect utility that is inherently personal and perceptual. We approach the indirect utility of public transport by measuring perceptions of time and feelings. The indirect utility of the car is approached by measuring affective and symbolic motives. Taking into account car use habits and habits of public transport use, the results show that people who have a high environmental concern perceive public transport use as easier, more useful and more pleasurable than people who do not have that environmental motivation. Such positive attitudes foster public transport use. Conversely, low environmental concern generates non-instrumental motives for car use, such as affective and symbolic motives. However, the relationship between affective and symbolic motives and car use habits is not robust. We can conclude that environmental concern influences mode choice habits and that the effect is partially mediated by perceptions and feelings towards public transport but not significantly by affective and symbolic motives for car use.     

Collaborative decision making: Use of multiattribute utility analysis to involve stakeholders in resolving controversial transportation issues

Instead of comparing a broad range of alternatives against common criteria, traditional transportation alternatives analysis methods tend to pit supporters of one alternative against those of another. As a result, public involvement processes intended to help resolve controversial issues often polarize the public and force decision makers to side with one position or another. However, a simple form of multiattribute utility analysis (MUA) has proven very effective in involving stakeholders in a collaborative process. This type of analysis is relatively inexpensive to execute, fosters problem solving, and has a high probability of leading to a defensible, implementable decision. This paper explores the application of the modified MUA approach to two California freeway access projects.