Bounding the efficiency of road pricing

Hai Yang, Wei Xu and Benjamin Heydecker

Transportation Research Part E: Logistics and Transportation Review, 2010, vol. 46, issue 1, 90-108

Abstract: This paper deals with the following question associated with congestion pricing in a general network with either fixed or elastic travel demand: what is the maximum efficiency loss of a general second-best pricing scheme due to inexact marginal-cost pricing in comparison with the first-best pricing or system optimum case? A formal answer to this question is provided by establishing an inefficiency bound associated with a given road pricing scheme. An application of the methods is provided for the practical trial-and-error implementation of marginal-cost pricing with unknown demand functions.

Keywords: Nash; game; Inefficiency; Congestion; pricing; Traffic; equilibria (search for similar items in EconPapers)
Date: 2010
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