Marvin Kraus

When are Anonymous Congestion Charges Consistent with Marginal Cost Pricing

There are constraints on pricing congestible facilities. First, if heterogeneous users are observationally indistinguishable, then congestion charges must be anonymous. Second, the time variation of congestion charges may be constrained. Do these constraints undermine the feasibility of marginal cost pricing, and hence the applicability of the first-best theory of congestible facilities? We show that if heterogeneous users behave identically when using the congestible facility and if the time variation of congestion charges is unconstrained, then marginal cost pricing is feasible with anonymous congestion charges. If, however, the time variation of congestion charges is constrained, optimal pricing with anonymous congestion charges entails Ramsey pricing.

A new look at the two-mode problem

This paper considers the second-best policy problem that arises when auto travel is priced below its marginal cost and there is a substitute mass transit mode. We analyze the problem by combining a model of a rail line based on Kraus and Yoshida (JUE (2002)) with the highway bottleneck model. The model involves a transit authority which optimizes, in addition to the fare, two dimensions of transit capacity. These are (1) the number of train units serving the route and (2) the capacity of an individual train unit. Under a very weak condition, second-best optimality involves expanding both dimensions of transit capacity. The larger of the effects is on train size.

Scale economies analysis for urban highway networks

Extending scale economies analysis from an individual highway to an urban highway network leads to an interesting new problem. When demand increases in a network, establishing a new long run equilibrium may require either increasing the capacities of existing links or adding new links (e.g., new roads, interchanges, overpasses). This paper develops a theoretical framework for analyzing economies of scale in this setting and then uses that framework to obtain a pseudo-empirical estimate of returns to scale. The results suggest that mild scale economies exist in urban highway travel.

The welfare gains from pricing road congestion using automatic vehicle identification and on-vehicle meters

It is a widely accepted proposition that there is a general underpricing of auto travel in U.S. cities. Auto travel imposes a congestion externality with an efficient peak period level estimated at lo-23t per mile on urban freeways (Small 1121). 2* 3 But, for most urban auto travel, tolls consist almost entirely of the gasoline excise tax. At a fuel economy of 15 miles per gallon, the auto toll implied by the current high gas tax in the United States of 25e per gallon is only 1.7e per mile. This is much too low for most peak period travel and even underprices some off-peak travel. The purpose of this study is to estimate the welfare gains which are possible under different regimes for imposing higher auto tolls in urban areas. The three regimes studied are associated with a higher gas tax and systems called automatic vehicle identification and on-vehicle metering. The framework for the study is a model of a city whose shape is that of a wedge or pie-slice of a circle. The model’s features include:

The Role of Pollutee Taxes in Externality Problems

Although disagreements remain regarding how charges should be assessed and the resulting revenues distributed, the standard prescription for dealing with technological externalities has long been to incorporate them into the pricing system. A serious problem exists in filling this prescription. Real world externalities involve multiple local optima and interrelationships that are both complex and changing. This being the case, it would be impossibly costly to obtain the information required to design a pricing system for externalities that would enable moving in one step from an existing, nonoptimum allocation of resources to a globally optimum allocation. Several writers, partly with these information costs in mind, have analysed the allocative effects of schemes in which tax rates are altered recursively to reflect changes in current damage levels induced by adjustments to prior taxes. If these adjustment processes could be shown to converge to a social optimum, their much smaller information requirements would make them very attractive (ignoring the wastes and irreversibilities they might entail). At least two arguments for taxing pollutees (i.e. those damaged by technological externalities) as well as polluters are suggested by these analyses. First, a passage in Coase (1960, p. 42) suggests the following sort of rationalization: a tax-induced reduction in the emissions of a smoky factory would make its environs more attractive for dwellings. An increase in the number of factory neighbours would increase the harm done by the marginal puff of smoke and therefore increase the marginal tax and the costs incurred by the factory to reduce emissions. Efficiency might seem to dictate taxing neighbours, thereby forcing

Land use in a circular city

Abstract This paper is concerned with optimal allocation of urban land to transportation. It attempts to extend the work of Solow and Vickrey, who posed this problem in an operationally one-dimensional long narrow city, to a two-dimensional circular city with a network of radial and circumferential roads. An interesting new problem arises, namely that travelers now have a choice of routes. Rules for optimal resource allocation are developed and analyzed. Assuming travel costs to be a strictly convex function of traffic density, it is shown that there is no travel through the center of an optimal city.

Principles of Transport Economics

Traditionally, courses in transport economics were divided into three sections: demand, supply, and regulation. The section on demand focused on empirical work estimating mode-specific demand elasticities and on short-term demand forecasting using discrete choice models. The section on supply concentrated on applied work estimating mode-specific cost functions, but also contained some discussion of the technology of congestion. And the section on regulation considered both the positive and normative aspects of regulation in different transport industries. The normative part applied textbook microeconomic theory to identify market failures and to derive optimal corrective policy, and the positive part applied the same body of theory to examine the effects of alternative regulatory policies. 18.

Land use in a circular city: Some numerical results

Abstract In a previous paper (“Land Use in a Circular City”, Journal of Economic Theory , 1974), I considered efficient land use and travel patterns in a circular city consisting of a homogeneous economic activity and a network of radial and circumferential roads. My analysis assumed that under decentralized optimum conditions, the price of traveling circumferentially through a radian would increase with distance from the city center. Under this and a second pricing assumption, an optimum would involve either restricting inward trip penetration or providing travelers with an inner ring road. This paper provides numerical illustrations of the optimum when trip penetration is restricted. The results suggest that the underlying pricing assumptions are likely not valid.