Bottleneck Congestion: Differentiating the Coarse Charge

Tinbergen Institute Discussion Paper 2010-097/3

14 Pages Posted: 24 Sep 2010

See all articles by Jasper Knockaert

Jasper Knockaert

affiliation not provided to SSRN

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics; Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Date Written: September 6, 2010

Abstract

The traditional bottleneck model for road congestion promotes the implementation of a triangular, fully time varying, charge as the optimal solution for the road congestion externality. However, cognitive and technological barriers put a practical limit to the degree of differentiation real world mplementations can handle. The traditional approach to accommodate for this concern has been a step toll, with the single step coarse charge as its simplest case. In this paper we study how efficiency of the coarse charge can be improved by differentiating its level and timing across groups of travellers. We use the traditional bottleneck model to analyse how the coarse charge can be differentiated over two groups of travellers assuming inelastic peak-hour demand. The results of our analysis indicate that differentiating the coarse charge across two groups of travellers considerably improves its efficiency without increasing cognitive effort and decision making costs for the individual traveller. A numeric illustration reveals a welfare gain of 69% of the first best charge, up from 53% for the generic coarse charge. This increase is similar to what is obtained by moving from the coarse charge to a generic two step toll. Once different groups have been defined, one could in fact achieve the same gains by temporal separation of drivers, for example by use of licence plate numbers. The presented charging regime has a considerable degree of flexibility with respect to share of travellers to attribute to each scheme, which further adds to its merits in practical applicability.

Keywords: Traffic congestion, Road pricing, Bottleneck model, Step tolls

JEL Classification: R41, R48, D62

Suggested Citation

Knockaert, Jasper and Verhoef, Erik T. and Rouwendal, Jan, Bottleneck Congestion: Differentiating the Coarse Charge (September 6, 2010). Tinbergen Institute Discussion Paper 2010-097/3, Available at SSRN: https://ssrn.com/abstract=1681394 or http://dx.doi.org/10.2139/ssrn.1681394

Jasper Knockaert (Contact Author)

affiliation not provided to SSRN

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 020 4446094 (Phone)
+31 020 4446004 (Fax)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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