Why Congestion Tolling Could be Good for the Consumer: The Effects of Heterogeneity in the Values of Schedule Delay and Time on the Effects of Tolling

Tinbergen Institute Discussion Paper 10-016/3

21 Pages Posted: 26 Jan 2010

See all articles by Vincent A.C. van den Berg

Vincent A.C. van den Berg

VU University Amsterdam; Tinbergen Institute

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics; Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: January 25, 2010

Abstract

In studying congestion tolling, it is important to account for heterogeneity in preferences of drivers, as ignoring it can bias the welfare gains. We analyse the effects of tolling, in the bottleneck model, with continuous heterogeneity in the value of time and schedule delay. The welfare gain of a time-variant toll increases with heterogeneity in the value of schedule delay. With heterogeneity, tolling makes the arrival ordering more efficient, and this lowers scheduling costs. If there is not much more heterogeneity in the value of time than in the value of schedule delay, then first-best tolling decreases the generalised price for most users. In our model, first-best tolling is not most detrimental for the lowest values of time and schedule delay: it raises prices more for users with an average value of schedule delay and a slightly larger value of time. Further, the lowest values of time are among those who gain most from a public pay-lane.

Keywords: biases in calculated welfare effects, bottleneck model, distributional effects, heterogeneity in the value of schedule delay, heterogeneity in the value of time, second-best tolls

JEL Classification: R41, R48, H23

Suggested Citation

van den Berg, Vincent A.C. and Verhoef, Erik T., Why Congestion Tolling Could be Good for the Consumer: The Effects of Heterogeneity in the Values of Schedule Delay and Time on the Effects of Tolling (January 25, 2010). Tinbergen Institute Discussion Paper 10-016/3, Available at SSRN: https://ssrn.com/abstract=1541922 or http://dx.doi.org/10.2139/ssrn.1541922

Vincent A.C. van den Berg (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

HOME PAGE: http://www.feweb.vu.nl/nl/afdelingen-en-instituten/spatial-economics/staff/v-berg/index.asp

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 020 4446094 (Phone)
+31 020 4446004 (Fax)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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