THE TOLL-PRICE COMPONENT OF TRAVEL DEMAND ELASTICITY

Abstract

The theory of marginal cost pricing maintains that setting the price of travel equal to its marginal social cost will optimize travel demand. This generally en- tails the addition of a toll during congested periods. The size of this congestion toll and its impact on traffic flow is dependent on the toll-price elasticity of travel demand. This is just one component of the elasticity of travel demand, which includes the elasticity of travel demand with respect to the price of gas, tolls, parking fees, maintenance costs, repair costs, the value of travel time, and other readily perceived costs of driving. This paper examines both the toll-price component of elasticity under flat-rate tolls and tolls that vary either by time of day or congestion level. Using empirical evidence it was found that the toll-price component of the elasticity of variable tolls was generally greater than that of flat-rate tolls with both rates comparable to other component elasticities of travel demand.

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