THE VALUE OF VALUE PRICING
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Abstract
The federal government has been sponsoring demonstrations of toll roads and value pricing to try to win over a highly resistant public. Two of the demonstrations in California show that the mechanisms and software programs work well, that transactions and enforcement are manageable and that drivers are adjusting. In one, drivers pay fees based on the time of day and day of the week, with carpools getting a discount. In the second, single drivers can pay a premium to ride in what were under-used carpool lanes. A key flaw in current approaches is the requirement that there be a free alternative. That means that congestion on the free portion must not improve so much that the paying alternative is no longer attractive. Computer simulations of different methods of value pricing show that fine tuning of the prices charged can go a long way toward eliminating the need for a free alternative, because the benefits increase dramatically. But it is hard to do it right.