Optimal Congestion Pricing with Diverging Long-run and Short-run Scheduling Preferences

Erik Verhoef

No 17-077/VIII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Recent empirical work has suggested that there is an important distinction between short-run versus long-run scheduling behaviour of commuters, reflected in differences in values of time and schedule delays, as well as in preferred arrival moments, for the short-run versus the long-run problem. Peer et al. (2015) for example find that the average value of time when consumers form their routines in the long-run problem may exceed by a factor 6 the short-run value that governs departure time choice given these routines. For values of schedule delay, in contrast, the short-run value exceeds the long-run value, by a factor 2. And, when forming routines, consumers in fact choose a most preferred arrival time that may deviate from the value they would choose in absence of congestion because a change in routines may mean that shorter delays will be encountered. This paper investigates whether this distinction between short-run and long-run scheduling decisions affect optimal pricing of a congestible facility. Using a stochastic dynamic model of flow congestion for describing short-run equilibria and integrating it with a dynamic model of routine formation, it is found that consistent application of short-run first-best optimal congestion pricing does not optimally decentralize the optimal formation of routines in the long-run problem. A separate instrument, next to road pricing, is therefore needed to optimize routine formation.

Keywords: Congestion pricing; dynamic congestion; scheduling (search for similar items in EconPapers)
JEL-codes: D62 R41 R48 (search for similar items in EconPapers)
Date: 2017-09-05
New Economics Papers: this item is included in nep-ore, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal congestion pricing with diverging long-run and short-run scheduling preferences (2020)
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