Estimating Optimal Framework for Congestion Pricing of Expressways

Date

2019

Authors

Scheppers, Jason Paul

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Abstract

Congestion pricing with a user pays principal has been proposed by many. Vickrey has shown great promise in his assessment that shows tolling can eliminate congestion at a price equal to the value of congestion time delay charged to the user in the form of money. Vickrey’s claim is that the same cost of congestion is still incurred by the all the user but if money is charged then you still have all the money collected. This has significant promise but Vickrey does not provide an improvement, because he does not enumerate how the money should be spent to achieve the desired result. It is critical to define and understand the impacts of spending the toll revenue to choose an optimal market. To form a foundation to describe the optimal market, I define and review the following concepts: Externality relativity - defining meaningful groups and irrelevant groups that distort solutions; ceterus paribus clarity and understanding how it is implemented impacts assessments; Effective nuisance law and how it controls meaningful responses to external costs or benefits; Variability of the Value of Money; Transactions Costs and; Transactions Equilibrium.

With these concepts as foundations, I will assess the current dilemma of how current congestion charging falls short of making improvement for those that are harmed. I will explore additional margins where potential gain can be made and focus on pareto beneficial improvements. I will show that with heterogenous values of time and a market that trades in money instead of delay, significant value can be created for road users. This change to monetary payment materially improves user benefits and establishes a system of trade between users. The system facilitates payment to those will willingly shift time preferences for money. I show that the value produced by paying some road users to time shift time reduces delay more than investing same money in added capacity. I will provide a discussion of how the findings are applicable to current pricing algorithms and I will discuss potential new pricing opportunities. This discussion will also include the political considerations to having this pricing scheme implemented.

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Keywords

Toll, Transportation

Citation

Department

Economics