Abstract
This paper studies first-best and second-best congestion pricing in the presence of unobserved and observed preference heterogeneity using a stylised stochastic user equilibrium choice model. Travellers choose between multiple alternatives, have heterogeneous values of travel times, and may differ in their valuation of variety. We derive first-best and second-best tolls taking into account how the overall network demand responds to expected generalized prices, including tolls. For second-best pricing, we show that with homogeneous values of times the welfare losses of second-best pricing are smaller when route choice is probabilistic than when route choice is deterministic. Furthermore, we find that with heterogeneous values of times and benefits of variety, uniform second-best tolls and group-differentiated tolls can be very close, implying potentially low welfare losses from the inability to differentiate tolls. Finally, we show that there are cases where all groups benefit from second-best congestion pricing, but that these cases are likely to be politically unacceptable because tolls are then higher for low income groups.
| Original language | English |
|---|---|
| Pages (from-to) | 137-157 |
| Number of pages | 21 |
| Journal | Transportation Research Part B: Methodological |
| Volume | 117 |
| Issue number | Part A |
| DOIs | |
| Publication status | Published - Nov 2018 |
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Keywords
- Preference heterogeneity
- Probabilistic choice
- Scale heterogeneity
- Second-best congestion pricing
- Stochastic user equilibrium
Cite this
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Preference heterogeneity and congestion pricing : The two route case revisited. / Koster, Paul; Verhoef, Erik; Shepherd, Simon; Watling, David.
In: Transportation Research Part B: Methodological, Vol. 117, No. Part A, 11.2018, p. 137-157.Research output: Contribution to Journal › Article › Academic › peer-review
TY - JOUR
T1 - Preference heterogeneity and congestion pricing
T2 - The two route case revisited
AU - Koster, Paul
AU - Verhoef, Erik
AU - Shepherd, Simon
AU - Watling, David
PY - 2018/11
Y1 - 2018/11
N2 - This paper studies first-best and second-best congestion pricing in the presence of unobserved and observed preference heterogeneity using a stylised stochastic user equilibrium choice model. Travellers choose between multiple alternatives, have heterogeneous values of travel times, and may differ in their valuation of variety. We derive first-best and second-best tolls taking into account how the overall network demand responds to expected generalized prices, including tolls. For second-best pricing, we show that with homogeneous values of times the welfare losses of second-best pricing are smaller when route choice is probabilistic than when route choice is deterministic. Furthermore, we find that with heterogeneous values of times and benefits of variety, uniform second-best tolls and group-differentiated tolls can be very close, implying potentially low welfare losses from the inability to differentiate tolls. Finally, we show that there are cases where all groups benefit from second-best congestion pricing, but that these cases are likely to be politically unacceptable because tolls are then higher for low income groups.
AB - This paper studies first-best and second-best congestion pricing in the presence of unobserved and observed preference heterogeneity using a stylised stochastic user equilibrium choice model. Travellers choose between multiple alternatives, have heterogeneous values of travel times, and may differ in their valuation of variety. We derive first-best and second-best tolls taking into account how the overall network demand responds to expected generalized prices, including tolls. For second-best pricing, we show that with homogeneous values of times the welfare losses of second-best pricing are smaller when route choice is probabilistic than when route choice is deterministic. Furthermore, we find that with heterogeneous values of times and benefits of variety, uniform second-best tolls and group-differentiated tolls can be very close, implying potentially low welfare losses from the inability to differentiate tolls. Finally, we show that there are cases where all groups benefit from second-best congestion pricing, but that these cases are likely to be politically unacceptable because tolls are then higher for low income groups.
KW - Preference heterogeneity
KW - Probabilistic choice
KW - Scale heterogeneity
KW - Second-best congestion pricing
KW - Stochastic user equilibrium
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UR - http://www.scopus.com/inward/citedby.url?scp=85053081002&partnerID=8YFLogxK
U2 - 10.1016/j.trb.2018.08.010
DO - 10.1016/j.trb.2018.08.010
M3 - Article
VL - 117
SP - 137
EP - 157
JO - Transportation Research. Part B: Methodological
JF - Transportation Research. Part B: Methodological
SN - 0191-2615
IS - Part A
ER -