Preference heterogeneity and congestion pricing: The two route case revisited
Paul Koster,
Erik Verhoef,
Simon Shepherd and
David Watling
Transportation Research Part B: Methodological, 2018, vol. 117, issue PA, 137-157
Abstract:
This paper studies first-best and second-best congestion pricing in the presence of unobserved and observed preference heterogeneity using a stylised stochastic user equilibrium choice model. Travellers choose between multiple alternatives, have heterogeneous values of travel times, and may differ in their valuation of variety. We derive first-best and second-best tolls taking into account how the overall network demand responds to expected generalized prices, including tolls. For second-best pricing, we show that with homogeneous values of times the welfare losses of second-best pricing are smaller when route choice is probabilistic than when route choice is deterministic. Furthermore, we find that with heterogeneous values of times and benefits of variety, uniform second-best tolls and group-differentiated tolls can be very close, implying potentially low welfare losses from the inability to differentiate tolls. Finally, we show that there are cases where all groups benefit from second-best congestion pricing, but that these cases are likely to be politically unacceptable because tolls are then higher for low income groups.
Keywords: Stochastic user equilibrium; Second-best congestion pricing; Preference heterogeneity; Scale heterogeneity; Probabilistic choice (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:transb:v:117:y:2018:i:pa:p:137-157
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DOI: 10.1016/j.trb.2018.08.010
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