Abstract
Traffic congestion is among the main market failures in modern cities. Dynamic marginal external cost pricing is the textbook economic response to this externality. Recent empirical work has shown that there is an important distinction between short-run departure time choice versus long-run routine formation of commuters, also characterized by differences in values of time and schedule delays for the short-run versus the long-run problem. This paper investigates whether this affects optimal pricing of congested roads. Using a dynamic model of congestion, and integrating it with a dynamic model of routine formation, it is found that contrary to expectation, short-run optimal congestion pricing alone cannot optimally decentralize the optimal formation of long-run routines. A separate instrument is therefore needed to optimize routine formation.
| Original language | English |
|---|---|
| Pages (from-to) | 191-209 |
| Number of pages | 19 |
| Journal | Transportation Research Part B: Methodological |
| Volume | 134 |
| DOIs | |
| Publication status | Published - 1 Apr 2020 |
Funding
Financial support from ERC (AdG Grant #246969 OPTION) is gratefully acknowledged. I thank the handling Editor, Robin Lindsey, and three anonymous reviewers for very helpful comments and suggestions on the original submission. I also thank the Department of Economics, University of Gothenburg, for their hospitality during my visit when part of the work in the paper was carried out.
| Funders | Funder number |
|---|---|
| Department of Economics, University of Gothenburg | |
| Seventh Framework Programme | 246969 |
| European Research Council |
Keywords
- Congestion pricing
- Dynamic traffic congestion
- Scheduling
