Final report: The Viability of Value Pricing Demonstrations
Principal Investigator:
Kenneth A. Small
Institute of Transportation Studies
University of California, Irvine
949-824-5658
ksmall@uci.edu
Abstract:
Recently, the transportation policy community has turned to small-scale demonstration projects to test and publicize road pricing. Short-term demonstrations were carried out in Stuttgart, Germany and Bristol, England, while potentially permanent projects now operate in Orange County, (California), San Diego (California), and Houston (Texas). The latter three make use of value pricing, in which travelers can choose between free and priced roadways. Recent research, however, has uncovered a problem for such demonstrations: minimizing aggregate travel-delay costs on two parallel roadways- when one must be free--may call for tolls on the express roadways that are far lower than those now charged. In simulation studies, value pricing is sometimes worse than no pricing at all. Key words: value-pricing, road pricing, value of time, demonstration projects, second-best pricing
Work Completed:
The simulation work is complete, and has led to a paper that was presented in many venues and has been published in Journal of Urban Economics. This work was very successful in explaining how the desirability of road-pricing demonstration projects using "value pricing" depends critically on differences in the value different people place on time savings. The alternative simulation model using a continuous value of time has also been completed, leading to a working paper that is being revised following peer review at a journal. Results from the two papers are summarized in an article in Access magazine in spring 2001.
The portion of the research involving empirical measurement of variation in value of time has been completed and written in a working paper with Jia Yan and Clifford Winston. That paper was presented at the American Economic Association annual meeting in January 2002. It was subsequently revised and submitted to a top-ranked academic journal.
A summary paper written for UCTC's Access magazine was reprinted in a trade publication for public works infrastructure developers and was translated into Japanese for a publication of the Overseas Construction Association of Japan.
Papers:
Small, Kenneth A., and Jia Yan, "The Value of 'Value Pricing' of Roads: Second-Best Pricing and Product Differentiation", Journal of Urban Economics, vol. 49 (2001), pp. 310-336.
Small, Kenneth A., "The Value of 'Value Pricing'", Access No. 18 (Spring 2001), pp. 23-27. Republished in Public Works Financing, July-August 2001, International Supplement, pp. 1-4.
Small, Kenneth A., "The Value of Value Pricing," Access, Publication of University of California Transportation Center, No. 18 (Spring 2001), pp. 23-27.
Reprinted in Public Works Financing International Supplement, July-August 2001, pp. 1-8.
Extract translated into Japanese by the Japan External Trade Organization, New York, for reprinting in: OCAJI, a periodical of the Overseas Construction Association of Japan, Inc., Tokyo (2002).
Conferences Attended:
Transportation Research Board, Washington, DC, Jan. 2000.
Workshop on The Politics of Pricing, Govt. Institute for Econ. Research, Helsinki, Finland, Aug. 1999.
Tinbergen Institute (Amsterdam), May 2000.
Katholieke Universiteit, Leuven (Belgium), May 2000.
American Economic Association, Atlanta, Jan. 2002.
Other Accomplishments:
None to date
Percent Complete:
100%
Direct Cost:
$32,932