Dynamic Road Pricing and the Value of Time and Reliability

Daniel Brent and Austin Gross ()
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Austin Gross: https://econ.washington.edu/people/austin-gross

Departmental Working Papers from Department of Economics, Louisiana State University

Abstract: High Occupancy Toll (HOT) lanes that use dynamic pricing to manage congestion and generate revenue are increasingly popular but poorly understood. In this paper we estimate the behavioral response of drivers to dynamic pricing in a HOT lane. The challenge in estimation lies in the simultaneity of price and demand: the structure of dynamic tolling ensures that prices increase as more drivers enter the HOT lane. Prior research has found that higher prices in HOT lanes increase usage. We find that after controlling for simultaneity arising from autocorrelation HOT drivers instead respond to tolls in a manner consistent with economic theory. The average response to a 10% increase in the toll is a 2% reduction in usage. Drivers primarily value travel reliability over time savings, although there is heterogeneity in the relative values of time and reliability based on time of day and destination to or from work. The results highlight the importance of both controlling for simultaneity when estimating demand for dynamically priced toll roads and treating HOT lanes with dynamic prices as a di erentiated product with bundled attributes.

Date: 2016-07
New Economics Papers: this item is included in nep-tre and nep-ure
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Dynamic road pricing and the value of time and reliability (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:lsu:lsuwpp:2016-07

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