Nonlinear pricing on private roads with congestion and toll collection costs

Nonlinear pricing (a form of second-degree price discrimination) is widely used in transportation and other industries but it has been largely overlooked in the road-pricing literature. This paper explores the incentives for a profit-maximizing toll-road operator to adopt some simple nonlinear pricing schemes when there is congestion and collecting tolls is costly. Users are assumed to differ in their demands to use the road. Regardless of the severity of congestion, an access fee is always profitable to implement either as part of a two-part tariff or as an alternative to paying a toll. Use of access fees for profit maximization can increase or decrease welfare relative to usage-only pricing for profit maximization. Hence a ban on access fees could reduce welfare.     

Introducing congestion pricing on a new toll road

This paper proposes a demonstration project to test the effectiveness of congestion pricing in an urban area. It reviews the general theoretical case for such pricing and summarizes recent international interest in congestion pricing. Next, it sets forth the reasons why demonstration projects are needed, both to add to our knowledge about how effective congestion pricing may prove to be, and to address political and other public-acceptance barriers to implementation of the concept. The paper then defines a specific proposed test site for congestion pricing: a new toll road being planned for Orange County, California. It is proposed that instead of charging flat-rate tolls, the transportation agency could charge peak and off-peak tolls, increasing the level of the peak charge each year over a period of up to 10 years unless or until toll revenues decline below the levels forecast under the flat-rate toll alternative. Measurements of traffic flow and ride-sharing behavior would be made, as well as calculations of emission-reduction effects. The paper concludes with a brief discussion of marketing and political considerations involved in conducting such a demonstration.Abbreviations ARB Air Resources Board - AVI Automatic Vehicle Identification - CDMG Corridor Design Management Group - HOV High-occupancy vehicle - SJHTC San Joaquin Hills Transportation Corridor - TCA Transportation Corridor Agency - VMT Vehicle miles traveled     

Optimal congestion taxes in a time allocation model

The purpose of this paper is to study optimal congestion taxes in a time-allocation framework. This makes it possible to distinguish taxes on inputs in the production of car trips and taxes on transport as an activity. Moreover, the model allows us to consider the implications of treating transport as a demand, derived from other activities. We extend several well known tax rules from the public finance literature and carefully interpret the implications for the optimal tax treatment of passenger transport services. The main findings of the paper are the following. First, if governments are limited to taxing market inputs into transport trip production, the time-allocation framework: (i) provides an argument for taxing congestion below marginal external cost, (ii) implies a favourable tax treatment for time-saving devices such as GPS, and (iii) provides a previously unnoticed argument for public transport subsidies. Second, if the government has access to perfect road pricing that directly taxes transport as an activity, all previous results disappear. Third, in the absence of perfect road pricing, the activity-specific congestion attracted by employment centres, by shopping centres or by large sports and cultural events should be corrected via higher taxes on market inputs in these activities (e.g., entry tickets, parking fees, etc.).     

Understanding public response to a congestion charge: A random-effects ordered logit approach

Public acceptance is consistently listed as having an enormous impact on the implementation and success of a congestion charge scheme. This paper investigates public acceptance of such a scheme in Australia. Surveys were conducted in Brisbane and Melbourne, the two fastest growing Australian cities. Using an ordered logit modeling approach, the survey data including stated preferences were analyzed to pinpoint the important factors influencing people’s attitudes to a congestion charge and, in turn, to their transport mode choices. To accommodate the nature of, and to account for the resulting heterogeneity of the panel data, random effects were considered in the models. As expected, this study found that the amount of the congestion charge and the financial benefits of implementing it have a significant influence on respondents’ support for the charge and on the likelihood of their taking a bus to city areas. However, respondents’ current primary transport mode for travelling to the city areas has a more pronounced impact. Meanwhile, respondents’ perceptions of the congestion charge’s role in protecting the environment by reducing vehicle emissions, and of the extent to which the charge would mean that they travelled less frequently to the city for shopping or entertainment, also have a significant impact on their level of support for its implementation. We also found and explained notable differences across two cities. Finally, findings from this study have been fully discussed in relation to the literature.     

Bus congestion, optimal infrastructure investment and the choice of a fare collection system in dedicated bus corridors

Microeconomic optimisation of scheduled public transport operations has traditionally focused on finding optimal values for the frequency of service, capacity of vehicles, number of lines and distance between stops. In addition, however, there exist other elements in the system that present a trade-off between the interests of users and operators that have not received attention in the literature, such as the optimal selection of a fare payment system and a designed running speed (i.e., the cruising speed that buses maintain in between two consecutive stops). Alternative fare payment methods (e.g., on-board and off-board, payment by cash, magnetic strip or smart card) have different boarding times and capital costs, with the more efficient systems such as a contactless smart card imposing higher amounts of capital investment. Based on empirical data from several Bus Rapid Transit systems around the world, we also find that there is a positive relationship between infrastructure cost per kilometre and commercial speed (including stops), achieved by the buses, which we further postulate as a linear relationship between infrastructure investment and running speed. Given this context, we develop a microeconomic model for the operation of a bus corridor that minimises total cost (users and operator) and has five decision variables: frequency, capacity of vehicles, station spacing, fare payment system and running speed, thus extending the traditional framework. Congestion, induced by bus frequency, plays an important role in the design of the system, as queues develop behind high demand bus stops when the frequency is high. We show that (i) an off-board fare payment system is the most cost effective in the majority of circumstances; (ii) bus congestion results in decreased frequency while fare and bus capacity increase, and (iii) the optimal running speed grows with the logarithm of demand.