An Introduction Erik T Verhoef VU University Amsterdam etverhoefvunl Road transport Undeniable great benefits But also high cost for the users Automobile fuel maintenance But also time ID: 778193
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Slide1
The Economics of Road PricingAn Introduction
Erik T VerhoefVU University Amsterdame.t.verhoef@vu.nl
Slide2Road transport…Undeniable great benefits
But also high cost for the users…Automobile, fuel, maintenanceBut also: time… and to others in societyCongestion (3.5)Environment (8.5)Accident risks (14.5)
2
Slide3Pigou: (nearly) one century ago
3
Excessive social cost
Attractiveness of pricing: volume
and
composition
Limited acceptability
Attractiveness
(2): in reality many more “
behavioural
margins”
Slide4Acceptability: revenues are central
4
Slide5A closer look at capacity
An optimally designed and priced road
network
is
under
certain
technical
conditions
exactly self-financing (Mohring & Harwitz, 1962)Potential gains from applying:
EfficiencyAcceptabilityTransparancy in financingTransparency in
decision
making on
investments
Slide6So: Columbus’ Egg?
At least 4 “translation issues” from theory
to
practice
“
Certain
conditions
”:
neutral economies of scale in infrastructure supplyEmpirical evidence from US seems encouraging, but no thorough study in the
BeNeLux (yet)Only congestion component of road pricingRevenues =
capacity cost
≠
investment cost
Indivisibilities: minimum useful capacity (“1 lane”) is binding in periphery
No congestion, so no revenues…
Slide7Acceptabilty of dynamic pricing
Vickrey (1969)Considered second behavioural margin: departure time dynamicsBasic insightsIt is not total peak demand but its time profile within the peak that creates traffic jams at bottlenecksThat profile arises because travellers
trade off two cost components
Travel delays – as considered by Pigou
Schedule delays: cost of inconvenient timing
In dynamic equilibrium: the two balance, with varying importance
7
Slide8Example: Coenplein (2002)
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Capacity
Optimal pricing duplicates time-pattern of travel delays and flattens departure pattern to match capacity
Notable properties of optimum
Total number of cars does not change
Arrival moments at work doe not change
Slide9Search for more acceptable price instrumentsPricing: efficient, effective, but low acceptability
Rewarding (as in “Spitsmijden”: “Peak Avoidance”)Popular, effectiveBut (1): Financially unsustainable (rewards!)But (2): Less efficient (induced or latent demand problem)Hybrid solutions?Budget neutral: tradable permits
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Slide10“Spitsmijden” / “Peak Avoidance”
Series of experimentsRoadPublic transport“User paid” instead of “user pays”:Rewards for avoiding peak travelTypical characteristics of experimentsAutomated (GPS) detection of vehicles or individuals
Participants invited on the basis of observed peak behaviour
Financial incentive of around € 3,- to avoid peak travel
10
Slide11Effectiviness: SpitsMijden I (
Zoetermeer, 2006, 340 participants)11
Trips by clock time
Share
Clock time
With reward
Without reward
50% reduction in peak trips
Slide12SpitsMijden in the Train(Abonnements, 2012-2013, 467 participants)
12
Morning peak
Evening peak
Off-peak
With rewards
Pre-measurements
Post-measurements
22% reduction in peak trips
Slide13Prospects for tradeable permits…
Acceptability: likely to be higher than for pricingEfficiencyLikely to be higher than for rewarding (latent demand)But… will it work?
13
Slide14Mon
Tue
Wed
Thu
Fri
Mon
Tue
Wed
Thu
Fri
Slide15Mon
Tue
Wed
Thu
Fri
Mon
Tue
Wed
Thu
Fri
X
X
Slide16Mon
Tue
Wed
Thu
Mon
Tue
Thu
Fri
Fri
Slide17Mon
Tue
Wed
Thu
Mon
Thu
Fri
Fri
€
Slide18Trade
– €
+ €
Toll
– € € € € €
– € € €
Rewarding
0
+ € €
Slide19Design – an example
Behavioural challengesAvoid undesired speculationNever more trip-coins in possession than remaining choicesSmall transaction fee to avoid manipulation of trip-coin priceAvoid cheatingAutomated purchase of trip-coin when needed for a choice made, with a mark-up
Manage transaction costs
Trading with
bank
Avoid undesired speculation
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Slide20Lab-in-the-field (U-Smile)Set-up replicates a permit scheme that is as close as possible to the above case
Virtual / serious gaming environmentNo interference with actual mobility behaviourPay-off in true money, depending on performance in the gameParking experiment: parking charge vs parking permit
Slide21Lab-in-the-field – the looks
Parking choice
Permit price
Parking choice
Trade
Make your choice
My Budget
My Parking Permits
Day tariff
Permit
Parking choice
Trade
Trading
Permit price
My Budget
My Parking Permits
Buy
Sell
Day tariffs
Date
Tariff
Slide22Expected equilibrium
Participants received on average 3 permits2 in the one week, 4 in the other, to rationalize tradingParticipants had full information and could in principle compute the expected equilibrium, which looks like:All individuals:Use a permit on days with parking tariffs of €5, €4 and €3Pay the tariff on days with €2 and €1
Equilibrium permit price could be anything between €2
-
€3
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Slide23Permit price dynamics
Slide24Instantaneous rationality (1)
Slide25Responses
Scale: 1 Totally Disagree - 5 Totally Agree
Participating took me little time or effort
Tradeable parking permits could in reality sometimes be a good alternative for paid parking
Slide26Responses
Scale: 1 Totally Disagree - 5 Totally Agree
I found it difficult to determine the best parking choice
I found it difficult to determine whether it was best for me to buy, sell, or not trade a parking permit
Slide27ConclusionPricing
Efficient for many reasonsLimited acceptabilityRevenue use: capacity costsDynamics: smaller price impactRewardingTradable permits
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