Equity and Efficiency Analysis of Pricing Strategies in a Bimodal Network with Heterogeneous User Groups

Abstract

This paper investigates the equity and efficiency of pricing strategies in a bimodal transport network with elastic demand and heterogeneous users on the basis of logit-based discrete choice models. The network consists of a railway line and a parallel highway with a bottleneck that provide daily commuting services between a residential area and a workplace. On the basis of two user groups differing in values of time, first-best pricing is shown to remain possible through the use of anonymous charges under the stochastic user equilibrium condition. Second-best pricing is also examined, in which an equity constraint is introduced to ensure that some users, if not all, are at least not worse off from implementing the pricing at expectation level. The efficiency, equity, demand realization, and modal split resulting from various pricing strategies are investigated and numerically validated in a simplified real network connecting the Kowloon urban area to Hong Kong, China, International Airport. It was found that the equity-constrained second-best pricing can result in a win-win situation for society and users. The efficiency and welfare gains depend heavily on the values of time of user groups and the number of users in each group.

Get full access to this article

View all access options for this article.

References

Liu

L. N.

and McDonald

J. F.

Efficient Congestion Tolls in the Presence of Unpriced Congestion: A Peak and Off-Peak Simulation Model. Journal of Urban Economics, Vol. 44, 1998, pp. 352–366.

Liu

L. N.

and McDonald

J. F.

Economic Efficiency of Second-Best Congestion Pricing Schemes in Urban Highway Systems. Transportation Research B, Vol. 33, 1999, pp. 201–216.

Verhoef

E. T.

Second-Best Congestion Pricing in General Networks: Heuristic Algorithms for Finding Second-Best Optimal Toll Levels and Toll Points. Transportation Research B, Vol. 36, 2002, pp. 707–729.

Arnott

and Yan

The Two-Mode Problem: Second-Best Pricing and Capacity. Department of Economics, Boston College, Chestnut Hill, Mass., 2000.

De Palma

and Lindsey

Private Roads: Competition Under Various Ownership Schemes. Annals of Regional Science, Vol. 34, 2000, pp. 13–35.

Arnott

De Palma

and Lindsey

Economics of a Bottleneck. Journal of Urban Economics, Vol. 27, 1990, pp. 11–30.

Small

K. A.

The Incidence of Congestion Tolls on Urban Highways. Journal of Urban Economics, Vol. 13, 1983, pp. 90–111.

Hau

T. D.

Economic Fundamentals of Road Pricing: A Diagrammatic Analysis. In World Bank Policy Research Working Paper Series, WPS No. 1070, World Bank, Washington, D.C., 1992, pp. 1–96.

Evans

A. W.

Road Congestion Pricing: When Is It a Good Policy?

Journal of Transportation Economics and Policy, Vol. 26, No. 3 1992, pp. 213–244.

10.

Small

K. A.

Using the Revenues from Congestion Pricing. Transportation, Vol. 19, No. 4 1992, pp. 359–381.

11.

Mohring

Congestion. In Essays in Transportation Economics and Policy, Brookings Institution Press, Washington, D.C., 1999, pp. 181–222.

12.

Arnott

De Palma

and Lindsey

The Welfare Effects of Congestion Tolls with Heterogeneous Commuters. Journal of Transport Economics and Policy, Vol. 28, 1994, pp. 139–161.

13.

Tabuchi

Bottleneck Congestion and Modal Split. Journal of Urban Economics, Vol. 34, 1993, pp. 414–431.

14.

Huang

H. J.

Fares and Tolls in a Competitive System with Transit and Highway: The Case with Two Groups of Commuters. Transportation Research E, Vol. 36, 2000, pp. 267–284.

15.

Huang

H. J.

Pricing and Logit-Based Mode Choice Models of a Transit and Highway System with Elastic Demand. European Journal of Operational Research, Vol. 140, 2002, pp. 562–570.

16.

Z. X.

Lam

W. H. K.

and Huang

H. J.

Optimal Pricing Strategies for Competitive Transport Modes. Proc., 3rd International Conference on Traffic and Transportation Studies, America Society of Civil Engineers, 2002, pp. 1488–1495.

17.

Arnott

De Palma

and Lindsey

Route Choice with Heterogeneous Drivers and Group-Specific Congestion Costs. Regional Science and Urban Economics, Vol. 22, 1992, pp. 71–102.

18.

Small

K. A.

and Yan

The Value of “Value Pricing” of Roads: Second-Best Pricing and Product Differentiation. Journal of Urban Economics, Vol. 49, 2002, pp. 310–336.

19.

Small

K. A.

The Scheduling of Consumer Activities: Work Trips. American Economic Review, Vol. 72, 1982, pp. 467–479.

20.

Vickrey

W. S.

Congestion Theory and Transport Investment. American Economic Review, Vol. 59, 1969, pp. 251–261.

21.

Arnott

De Palma

and Lindsey

Recent Developments in the Bottleneck Model. In Road Pricing, Traffic Congestion and the Environment: Issues of Efficiency and Social Feasibility ( Button

K. J.

and Verhoef

E. T.

, eds.), Edward Elgar Publishing, 1998, pp. 79–105.

22.

Huang

H. J.

Bell

M. G. H.

and Yang

Bottleneck Congestion and Modal Split: Extensions of Tabuchi's Work. Beijing University of Aeronautics and Astronautics, Beijing, 1997.

23.

Lam

W. H. K.

and Zhou

Optimal Fare Structure for Transit Networks with Elastic Demand. In Transportation Research Record: Journal of the Transportation Research Board, No. 1733, TRB, National Research Council, Washington, D.C., 2000, pp. 8–14.

24.

Oppenheim

Urban Travel Demand Modeling: From Individual Choices to General Equilibrium. Wiley, New York, 1995.

25.

Yang

Sensitivity Analysis for the Elastic-Demand Network Equilibrium Problem with Applications. Transportation Research B, Vol. 31, 1997, pp. 55–70.