This paper addresses areas that much road pricing discussion overlooks, that is: 1. the dynamic interaction between pricing and capacity (that is taking existing road capacity as given and focussing only on pricing as a way to reduce demand); 2. the impact on close substitutes (alternative transport modes), including the public cost to expand infrastructure and increase operating subsidies; 3. the absence of competition for supply of road capacity and consequent monopoly behaviour and what that implies about prices. Much road pricing literature, by failing to highlight the crucial interaction between road pricing levels and road capacity, leaves the simplistic impression that the aim of optimal road prices is to restrict traffic volumes within existing road capacity. Our proposition is that optimal road network prices must always be the lesser of the short run cost (including congestion) and the long run marginal cost of additional road network capacity and optimal capacity on alternative modes. (a) For the covering entry of this conference, please see ITRD abstract no. E213716.
Samenvatting