Monday, December 3, 2012

Dealing with congestion: fast lane or toll booth?

In densely populated areas, road congestion is a fact of life. As time lost in traffic has an economic value, it is then quite obvious that road pricing with flexible tolls that depend on the current level of demand should provide for the most efficient allocation of cars through time and space. But there are some logistic problems with this, and depending on the actual implementation, some privacy issues as well.

Mogens Fosgerau claims one can get a Pareto improvement with a toll lane that is reserved for particular users if demand is inelastic. The lane set-up is similar to airport check-in, where privileged people get their own lane and others can use it if it is available. I question, though, that demand is inelastic. That may well be the case in the short-run, but people do adapt to road prices on a longer horizon by changing schedules and locations. Also, I find the comparison to tolls unfair in the sense that the benchmark is a coarse toll: there is a single toll price that is only activate when there is congestion. Obviously, it creates peak loads right before and after it is in place. That can easily be improved with more flexible pricing.

1 comment:

Mogens Fosgerau said...


I appreciate the interest in my paper. A little clarification: Providing a fast lane may yield a Pareto improvement even with elastic demand, it depends on how elastic demand is. It is also clear that maximal efficiency is achieved with a time varying toll. The question I ask in the paper is what can be done, if the "perfect" toll is not available.

Mogens Fosgerau