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First-best marginal cost toll for a traffic network with stochastic demand

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  • Sumalee, Agachai
  • Xu, Wei

Abstract

First-best marginal cost pricing (MCP) in traffic networks has been extensively studied with the assumption of deterministic travel demand. However, this assumption may not be realistic as a transportation network is exposed to various uncertainties. This paper investigates MCP in a traffic network under stochastic travel demand. Cases of both fixed and elastic demand are considered. In the fixed demand case, travel demand is represented as a random variable, whereas in the elastic demand case, a pre-specified random variable is introduced into the demand function. The paper also considers a set of assumptions of traveler behavior. In the first case, it is assumed that the traveler considers only the mean travel time in the route choice decision (risk-neutral behavior), and in the second, both the mean and the variance of travel time are introduced into the route choice model (risk-averse behavior). A closed-form formulation of the true marginal cost toll for the stochastic network (SN-MCP) is derived from the variational inequality conditions of the system optimum and user equilibrium assignments. The key finding is that the calculation of the SN-MCP model cannot be made by simply substituting related terms in the original MCP model by their expected values. The paper provides a general function of SN-MCP and derives the closed-form SN-MCP formulation for specific cases with lognormal and normal stochastic travel demand. Four numerical examples are explored to compare network performance under the SN-MCP and other toll regimes.

Suggested Citation

  • Sumalee, Agachai & Xu, Wei, 2011. "First-best marginal cost toll for a traffic network with stochastic demand," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 41-59, January.
    • Handle: RePEc:eee:transb:v:45:y:2011:i:1:p:41-59
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