Highway Toll Pricing

Abstract:     
For a tolled highway where consecutive sections allow vehicles enter and exit unrestrictedly, we propose a simple toll pricing method. We show that the method is the unique method that satisfies the properties of Transit-proofness (No Merging or Splitting) and Cost Recovery. The Transit-proofness property rules out strategic respones of road users against a toll pricing scheme while the Cost Recovery rules out cross subsidizations between road sections with regard to their costs. Furthermore, it is shown that the toll pricing method is the discrete version of Aumann-Shapley pricing rule. When there is unit traffic (vehicle) for each (feasible) pair of entrance and exit, we show that our toll pricing method is the Shapley value of an associated game to the problem. Moreover, if there is unit traffic entering at each entrance but they all exit at the last exit, the toll pricing method coincides with the well-known airport landing fee solution-the Sequential Equal Contribution rule by Littlechild and Owen (1973).

Number of Pages in PDF File: 22

Keywords: Highway toll, Aumann-Shapley method, Cost sharing, Shapley value

JEL Classification: C71

working papers series