Carpooling and driver responses to fuel price changes: Evidence from traffic flows in Los Angeles

We examine carpooling and driver responses to fuel price changes. Using a simple theoretical model, we show that traffic flows in mainline lanes unambiguously decrease when fuel prices increase, and this effect is stronger when the presence of a carpool lane provides a substitute to driving alone. In contrast, in carpool (HOV) lanes flow can either increase or decrease. These predictions are tested using 8years of traffic flow data for 1700 locations in Los Angeles. In our preferred specification, the mean elasticity of flow with respect to fuel price is 0.136 for HOV lanes. For a 10% increase in fuel price this implies 10 additional carpools per hour, $8.8 million per year in additional congestion costs for carpoolers and $11.3 million lower costs for mainline drivers. For mainline lanes, flow elasticities are −0.083 and −0.050 for highways with and without an HOV lane. These estimates imply that the mean highway with an HOV lane experiences a 30% larger decrease in hourly flow compared to the mean highway without an HOV lane. Flows in HOV lanes show an immediate decrease following a price increase but respond positively to price increases over time, which suggests time is an important input to carpool formation.