Pricing urban congestion: a structural random utility model with tra¢ c anticipation

We design and estimate a game theoretic congestion pricing mechanism in which the regulator aims at reducing urban tra¢ c congestion by price discriminating travelers according to their Value Of Time (VOT). Travelers’preferences depend on their observable characteristics, on the endogenous amount of congestion anticipated, on their Marginal Utility (MU) of income and on some unobserved factors. Using a French household survey, we estimate the demand models to simulate di¤erent pricing mechanisms. We …nd that unobserved determinants of transportation demand are signi…cant and are used to measure the anticipated time spent in tra¢ c and the comfort of traveling: diverging from these expectations is felt as more discomfort than if no expectations were formed a-priori. However some of this discomfort is derived from travelers’marginal utility of income: the lost time in tra¢ c is clearly "unpleasant" because of its opportunity cost. When the regulator and the transportation provider share common objectives, we show that a great welfare improvement can be achieved when implementing a homogenous pricing that accurately accounts for travelers VOT. Classi…cation codes: R4, D8, D6. Department of Economics, 1000 Hilltop Circle, Baltimore, MD 21250, USA. Telephone: 410-455-3117, Fax: 410-455-1054, Email: [email protected]. The author is especially grateful to the Editor Z. Eckstein, the Associate Editor H. Sieg and two anonymous referees for their very useful comments. She also thanks V. Komornik, R. Pollard and D. Sappington for their helpful suggestions and comments. An early version of this paper was presented at the Western Econometric Conference, Cincinnati, 2006, and at the European Economic Association Conference, Budapest, 2007.