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Optimal welfare price for a road corridor with heterogeneous users

Optimal welfare price for a road corridor with heterogeneous users
Optimal welfare price for a road corridor with heterogeneous users

In some countries it is fairly common to see two roads with the same origin and destination competing in the same corridor. One of them is usually a toll highway that offers a better quality to the users compared to its alternative: a free parallel single road, which might be tolled as well. This kind of transport network has been largely studied in the academic literature and particularly the optimal combination of tolls that maximizes economic efficiency. If both roads are tolled the problem is known as the first best, otherwise it is called the “untolled alternative”. There is a gap regarding how income distribution affects the optimal toll. The main objective of this paper is to add knowledge in the area by analysing the influence of the distribution of the Values of Travel Time (VTT) of the users of this corridor on the optimal combination of tolls. To solve this problem, the authors define a mathematical model aimed at obtaining the optimal welfare price for this kind of corridor under the hypothesis that drivers decide over the expectation of free flow conditions. The results show that the higher the average VTT the higher the optimal price, and the higher the dispersion (variance) of this VTT the lower the optimal price. It was also found that low income users who are not able to internalize externalities should not travel. Finally, first best pricing and untolled alternative schemes match for high income users.

Competing roads, Optimal price, Social welfare, Transportation pricing, Value of travel time distribution
1648-4142
318-329
Ortega Hortelano, Alejandro
a950aa2d-c35a-47d3-8219-12446fc7eaf3
Vassallo, Jose Manuel
7454c521-3295-4af1-84de-8779bdf0ebc8
Pérez, Juan Ignacio
19b00f0e-1f8d-41d3-bb7f-9fdb8b73cd1d
Ortega Hortelano, Alejandro
a950aa2d-c35a-47d3-8219-12446fc7eaf3
Vassallo, Jose Manuel
7454c521-3295-4af1-84de-8779bdf0ebc8
Pérez, Juan Ignacio
19b00f0e-1f8d-41d3-bb7f-9fdb8b73cd1d

Ortega Hortelano, Alejandro, Vassallo, Jose Manuel and Pérez, Juan Ignacio (2019) Optimal welfare price for a road corridor with heterogeneous users. Transport, 34 (3), 318-329. (doi:10.3846/transport.2019.9685).

Record type: Article

Abstract

In some countries it is fairly common to see two roads with the same origin and destination competing in the same corridor. One of them is usually a toll highway that offers a better quality to the users compared to its alternative: a free parallel single road, which might be tolled as well. This kind of transport network has been largely studied in the academic literature and particularly the optimal combination of tolls that maximizes economic efficiency. If both roads are tolled the problem is known as the first best, otherwise it is called the “untolled alternative”. There is a gap regarding how income distribution affects the optimal toll. The main objective of this paper is to add knowledge in the area by analysing the influence of the distribution of the Values of Travel Time (VTT) of the users of this corridor on the optimal combination of tolls. To solve this problem, the authors define a mathematical model aimed at obtaining the optimal welfare price for this kind of corridor under the hypothesis that drivers decide over the expectation of free flow conditions. The results show that the higher the average VTT the higher the optimal price, and the higher the dispersion (variance) of this VTT the lower the optimal price. It was also found that low income users who are not able to internalize externalities should not travel. Finally, first best pricing and untolled alternative schemes match for high income users.

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Accepted/In Press date: 24 May 2018
e-pub ahead of print date: 8 May 2019
Keywords: Competing roads, Optimal price, Social welfare, Transportation pricing, Value of travel time distribution

Identifiers

Local EPrints ID: 433050
URI: http://eprints.soton.ac.uk/id/eprint/433050
ISSN: 1648-4142
PURE UUID: 54443b48-e8d3-4b7e-b040-8fa0140f3ea6
ORCID for Alejandro Ortega Hortelano: ORCID iD orcid.org/0000-0002-5224-5363

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Date deposited: 07 Aug 2019 16:30
Last modified: 07 Oct 2020 02:06

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Author: Jose Manuel Vassallo
Author: Juan Ignacio Pérez

University divisions

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