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Free Content Product Differentiation on Roads

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Abstract:

The authors explore the properties of various types of public and private pricing on a congested road network, with heterogeneous users, and allowing for elastic demand. The network allows them to model certain features of real-world significance: pricing restrictions on either complementary or substitute links, as well as interactions between different user groups on shared links. They find that revenue-maximising pricing is much less efficient than welfare-maximising pricing, but this difference is mitigated by the product differentiation made possible with heterogeneous users. Ignoring heterogeneity causes the welfare benefits of a policy of current interest, namely second-best pricing of one of two parallel links, to be dramatically underestimated. Unlike first-best policies, secondbest policies are in danger of losing much of their potential effectiveness if heterogeneity is ignored when setting toll levels.

Document Type: Research Article

Publication date: 2004-01-01

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  • JTEP is international both in terms of authors and readership. Since it first appeared, more than 650 papers have been published from Europe, North America, the Pacific Rim/Australasia, Africa, Asia, and South America. This international variety is also reflected in the readership.

    Published four times a year, the journal covers all modes of transport and a wide variety of economic themes, including: Passenger Transport, Freight Transport, Shipping, Aviation, Transport Infrastructure, Environment & Energy, Traffic, Planning and Policy, Safety, Costs & Pricing, Competition, Evaluation, Productivity, Demand & Elasticities, Service Quality, Economies of Scale, Economics Regulation and Choice.

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