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Dynamic Road Pricing and the Value of Time and Reliability

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Abstract

High Occupancy Toll (HOT) lanes that use dynamic pricing to manage congestion and generate revenue are increasingly popular but poorly understood. In this paper we estimate the behavioral response of drivers to dynamic pricing in a HOT lane. The challenge in estimation lies in the simultaneity of price and demand: the structure of dynamic tolling ensures that prices increase as more drivers enter the HOT lane. Prior research has found that higher prices in HOT lanes increase usage. We find that after controlling for simultaneity arising from autocorrelation HOT drivers instead respond to tolls in a manner consistent with economic theory. The average response to a 10% increase in the toll is a 2% reduction in usage. Drivers primarily value travel reliability over time savings, although there is heterogeneity in the relative values of time and reliability based on time of day and destination to or from work. The results highlight the importance of both controlling for simultaneity when estimating demand for dynamically priced toll roads and treating HOT lanes with dynamic prices as a di erentiated product with bundled attributes.

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  • Daniel A. Brent & Austin Gross, 2016. "Dynamic Road Pricing and the Value of Time and Reliability," Departmental Working Papers 2016-07, Department of Economics, Louisiana State University.
    • Handle: RePEc:lsu:lsuwpp:2016-07
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    Cited by:

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    2. Louis-Philippe Beland & Daniel A. Brent, 2018. "Traffic and the Provision of Public Goods," Departmental Working Papers 2018-04, Department of Economics, Louisiana State University.
    3. Rossetti, Tomás & Broaddus, Andrea & Ruhl, Melissa & Daziano, Ricardo, 2023. "Commuter preferences for a first-mile/last-mile microtransit service in the United States," Transportation Research Part A: Policy and Practice, Elsevier, vol. 167(C).
    4. Antonio Bento & Kevin Roth & Andrew R. Waxman, 2020. "The Value of Urgency: Evidence from Real-Time Congestion Pricing," NBER Working Papers 26956, National Bureau of Economic Research, Inc.
    5. Li, Zheng & Hensher, David A. & Rose, John M., 2010. "Willingness to pay for travel time reliability in passenger transport: A review and some new empirical evidence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(3), pages 384-403, May.
    6. Beland, Louis-Philippe & Brent, Daniel A., 2018. "Traffic and crime," Journal of Public Economics, Elsevier, vol. 160(C), pages 96-116.

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