Delayer Pays Principle: Examining Congestion Pricing With Compensation

International Journal of Transport Economics, Vol. 31, No. 3, pp. 295-311

20 Pages Posted: 11 Sep 2007

See all articles by David Matthew Levinson

David Matthew Levinson

affiliation not provided to SSRN

Peter Rafferty

affiliation not provided to SSRN

Abstract

Despite its virtues, congestion pricing has yet to be widely adopted. This paper explores the issues of equity and use of toll revenue and several possible alternatives. The equity and efficiency problems of conventional (uncompensated) congestion pricing are outlined. Then, several alternatives are discussed and developed. A new compensation mechanism is developed, called the delayer pays principle. This principle ensures that those who are cause delay to others pay a toll to compensate those who are delayed. We evaluate the effectiveness of this idea by simulating alternative tolling approaches and evaluating the results across several measures, including delay, social cost, consumer surplus, and equity. Different tolling approaches can satisfy widely varying policy objectives, thus this principle is applicable in diverse situations. Such a system is viable and can eliminate some common hurdles of congestion pricing while remaining revenue neutral.

Keywords: congestion pricing, equity and efficiency, delayer pays

Suggested Citation

Levinson, David Matthew and Rafferty, Peter, Delayer Pays Principle: Examining Congestion Pricing With Compensation. International Journal of Transport Economics, Vol. 31, No. 3, pp. 295-311. Available at SSRN: https://ssrn.com/abstract=1012086

David Matthew Levinson (Contact Author)

affiliation not provided to SSRN

Peter Rafferty

affiliation not provided to SSRN ( email )

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