Congesting Pricing in a Road and Rail Network with Heterogeneous Values of Time and Schedule Delay

Tinbergen Institute Discussion Paper 11-059/3

25 Pages Posted: 29 Mar 2011

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: March 24, 2011

Abstract

We analyse congestion pricing in a road and rail network with heterogeneous users. On the road there is bottleneck congestion. In the train there is crowding congestion. We separately analyse "proportional heterogeneity" that varies the values of time and schedule delay scalarly in fixed proportions and "ratio heterogeneity" that is in the ratio of value of time to value of schedule delay. We analyse first-best pricing and second-best pricing on only road or rail. More "ratio heterogeneity" lowers the relative efficiency of welfare maximisation by pricing only the road. This relative efficiency also decreases with proportional heterogeneity. Conversely, in previous research with two parallel roads, the relative efficiency of "single-link pricing" increased with proportional heterogeneity. This difference is caused by two road being perfect substitutes, while car and train are imperfect substitutes. The welfare gain of congestion pricing in the train is less affected by heterogeneity. However, the relative efficiency of "profit maximisation on rail only" decreases with proportional and ratio heterogeneity. There are marked differences in the distributional effects on road and rail. On the road, pricing is generally more beneficial for the user the higher her value of time or schedule delay is. In the train, pricing has no distributional effects or is less beneficial the higher a user's value of time or schedule delay is.

Keywords: Congestion Pricing, Car Travel, Train Travel, Heterogeneity in Value of Time, Heterogeneity in Value of Schedule Delay, Substitute Modes

JEL Classification: D62, H23, L11, R41, R48

Suggested Citation

van den Berg, Vincent A.C. and Verhoef, Erik T., Congesting Pricing in a Road and Rail Network with Heterogeneous Values of Time and Schedule Delay (March 24, 2011). Tinbergen Institute Discussion Paper 11-059/3, Available at SSRN: https://ssrn.com/abstract=1793945 or http://dx.doi.org/10.2139/ssrn.1793945

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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