Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2017-09-05
Number: 17-077/VIII
Author-Name: Erik (E.T.) Verhoef
Author-Email: e.t.verhoef@vu.nl
Author-Workplace-Name: VU Amsterdam; Tinbergen Institute, The Netherlands
Title: Optimal Congestion Pricing with Diverging Long-run and Short-run Scheduling Preferences
Abstract: Recent empirical work has suggested that there is an important distinction between short-run versus long-run scheduling behaviour of commuters, reflected in differences in values of time and schedule delays, as well as in preferred arrival moments, for the short-run versus the long-run problem. Peer et al. (2015) for example find that the average value of time when consumers form their routines in the long-run problem may exceed by a factor 6 the short-run value that governs departure time choice given these routines. For values of schedule delay, in contrast, the short-run value exceeds the long-run value, by a factor 2. And, when forming routines, consumers in fact choose a most preferred arrival time that may deviate from the value they would choose in absence of congestion because a change in routines may mean that shorter delays will be encountered. This paper investigates whether this distinction between short-run and long-run scheduling decisions affect optimal pricing of a congestible facility. Using a stochastic dynamic model of flow congestion for describing short-run equilibria and integrating it with a dynamic model of routine formation, it is found that consistent application of short-run first-best optimal congestion pricing does not optimally decentralize the optimal formation of routines in the long-run problem. A separate instrument, next to road pricing, is therefore needed to optimize routine formation.
Classification-JEL: R41, R48, D62
Keywords: Congestion pricing, dynamic congestion, scheduling
File-Url: https://papers.tinbergen.nl/17077.pdf
File-Format: application/pdf
File-Size: 437442 bytes
Handle: RePEc:tin:wpaper:20170077