Willingness to spend and road pricing rates

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Willingness to spend and road pricing rates

Ferrari, Paolo

AbstractUsing a theoretical model of urban transport system the paper examines the influence of distribution of willingness to spend within the urban population on road pricing rates. It shows that the rates that must be imposed in an urban area in order to maintain pollutant concentration and congestion due to traffic within acceptable levels is heavily dependent on the distribution of the urban population’s willingness to spend. This fact severely limits the reliability of any method for calculating road pricing rates based on theoretical analysis, so that an experimental approach seems necessary. The paper shows that a relation exists between the toll rate per kilometer of trip and the average traffic congestion, which is typical of each urban area and can be determined experimentally by successively imposing three different rates and measuring the corresponding congestion levels. The relation can then be used to determine the pricing scheme when the purpose of road pricing is to maintain both the congestion and the environmental effects due to urban traffic below acceptable thresholds. An example shows how the model can help policymakers in decision-making processes.