Too Expensive to Meter: The Influence of Transaction Costs in Transportation and Communication

Philosophical Transactions of the Royal Society A: Mathematical Physical and Engineering Sciences, Vol. 366, No. 1872, pp. 2033-2046, 2008

Presented at Royal Society Discussion Meeting Networks: Modelling and Control, September 2007

14 Pages Posted: 7 Jan 2011 Last revised: 22 Jan 2011

See all articles by David Matthew Levinson

David Matthew Levinson

affiliation not provided to SSRN

Andrew Odlyzko

University of Minnesota - Twin Cities - School of Mathematics and Digital Technology Center

Date Written: March 6, 2008

Abstract

Technology appears to be making fine-scale charging (as in tolls on roads that depend on time of day or even on current and anticipated levels of congestion) increasingly feasible. Such charging also appears to be increasingly desirable, as traffic on roads continues to grow and costs and public opposition limit new construction. Similar incentives towards fine-scale charging also appear to be operating in communications and other areas, such as electricity usage. Standard economic theory supports such measures and technology is being developed and deployed to implement them. But their spread is not very rapid and their prospects for the future are uncertain. This paper presents a collection of sketches, ranging from ancient history to very recent developments, that illustrate the costs that charging imposes. Some of those costs are explicit (in terms of the monetary costs to users and the costs of implementing the charging mechanisms). Others are implicit, such as the time or the mental processing costs of users. These argue that the case for fine-scale charging is not unambiguous and that in many cases such charging may lead to undesirable outcomes.

Keywords: transport, telecommunications, London Underground, London railways, collection costs, transaction costs

JEL Classification: L92, R40, R41

Suggested Citation

Levinson, David Matthew and Odlyzko, Andrew, Too Expensive to Meter: The Influence of Transaction Costs in Transportation and Communication (March 6, 2008). Philosophical Transactions of the Royal Society A: Mathematical Physical and Engineering Sciences, Vol. 366, No. 1872, pp. 2033-2046, 2008 ; Presented at Royal Society Discussion Meeting Networks: Modelling and Control, September 2007. Available at SSRN: https://ssrn.com/abstract=1735657

David Matthew Levinson (Contact Author)

affiliation not provided to SSRN

Andrew Odlyzko

University of Minnesota - Twin Cities - School of Mathematics and Digital Technology Center ( email )

127 Vincent Hall
206 Church St. SE
Minneapolis, MN 55455
United States
612-625-6413 (Phone)
612-626-2017 (Fax)

HOME PAGE: http://www.dtc.umn.edu/~odlyzko

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