Pricing Urban Congestion

39 Pages Posted: 3 Dec 2008

Multiple version iconThere are 3 versions of this paper

Date Written: November 15, 2008


This paper reviews literature on the optimal design of pricing policies to reduce urban automobile congestion. The implications of a range of complicating factors are considered, such as traffic bottlenecks, constraints on which roads and freeway lanes in the road network can be priced, driver heterogeneity, private toll operators, other externalities besides congestion, and interactions between congestion taxes and the broader fiscal system. We also briefly discuss the incidence of congestion taxes and experience with this policy in the United States and elsewhere.

Although the economics literature on congestion pricing has advanced considerably over the last 20 years, research is still needed on the empirical measurement of second-best efficient tolls for urban centers and whether alternative design features have substantial implications for efficiency. More research is also needed on the design of schemes to promote feasibility by compensating adversely affected groups with minimal loss in economic efficiency.

Keywords: traffic congestion, externality, peak-period fee, congestion toll incidence

JEL Classification: R41, R48, H21

Suggested Citation

Parry, Ian W. H., Pricing Urban Congestion (November 15, 2008). RFF Discussion Paper No. 08-35, Available at SSRN: or

Ian W. H. Parry (Contact Author)

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