EconPapers    
Economics at your fingertips  
 

Product Differentiation on Roads: Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership

Erik Verhoef and Kenneth A. Small
Additional contact information
Kenneth A. Small: University of Irvine at California

No 99-066/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We explore the properties of various types of public and private pricing on acongested road network with heterogeneous users and allowing for elasticdemand. Heterogeneity is represented by a continuum of values of time. Thenetwork consists of both serial and parallel links, which allows us to modelsecond-best pricing restrictions on either complementary or substitute links,while still accounting for interaction between different groups on sharedlinks (e.g. in city centres). We find that private (revenue-maximizing)pricing is much less efficient than public pricing, whether on the partial orthe full network; but this difference is mitigated by the productdifferentiation made possible by heterogeneous users. Ignoring heterogeneitycauses the welfare benefits of second-best pricing of one parallel link, apolicy currently receiving favourable consideration, to be dramaticallyunderestimated. Product differentiation produces some unexpecteddistributional effects, including the possibility that first-best pricing canresult in one of the parallel routes being both more congested than withoutpricing.

Keywords: congestion; road pricing; networks; second-best (search for similar items in EconPapers)
JEL-codes: D62 R41 R48 (search for similar items in EconPapers)
Date: 1999-08-24
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
https://papers.tinbergen.nl/99066.pdf (application/pdf)

Related works:
Working Paper: Product Differentiation on Roads Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership (1999)
Working Paper: Product Differentiation on Roads: Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership (1999) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:19990066

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().

 
Page updated 2025-04-01
Handle: RePEc:tin:wpaper:19990066