The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation

Kenneth Small () and Jia Yan

University of California Transportation Center, Working Papers from University of California Transportation Center

Abstract: Some road-pricing demonstrations use “value pricing,” in which travelers can choose between a free but congested roadway and a priced roadway. Recent research has uncovered a potentially serious problem for such demonstrations, second-best tolls may be far lower than those typically charged, and from a welfare perspective, the latter may be worse than not pricing at all. That research, however, assumes that all travelers are identical and it therefore neglects the benefits of product differentiation. Using a model with two user groups, we find that accounting for heterogeneity in value of time as important in evaluating constrained policies, and improves the relative performance of policies that offer differential prices.

Keywords: Value pricing; congestion pricing; value of time; road pricing; high occupancy/toll lanes; Social and Behavioral Sciences (search for similar items in EconPapers)
Date: 2001-01-01
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Citations: View citations in EconPapers (130)

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Related works:
Journal Article: The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation (2001)
Working Paper: The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation (2000)
Working Paper: The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation (2000)
Working Paper: The Value of "Value Princing" of Roads: Second-Best Pricing and Product Differentiation (1999)
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