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ECN 190/TTP 215 Lecture 16: Transportation Economics: Highway Congestion

The document discusses transportation economics related to highway congestion. It introduces concepts like volume, density, speed and their relationship. It presents congestion graphs and explores how average and marginal costs of time spent on trips increase with volume. Two examples of how these costs can be modeled are provided. The document also discusses determining the social optimum in terms of maximizing net social benefits and setting optimal toll levels. Finally, it reviews different policies used in California for funding transportation.

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70 views30 pages

ECN 190/TTP 215 Lecture 16: Transportation Economics: Highway Congestion

The document discusses transportation economics related to highway congestion. It introduces concepts like volume, density, speed and their relationship. It presents congestion graphs and explores how average and marginal costs of time spent on trips increase with volume. Two examples of how these costs can be modeled are provided. The document also discusses determining the social optimum in terms of maximizing net social benefits and setting optimal toll levels. Finally, it reviews different policies used in California for funding transportation.

Uploaded by

Abu Abdul Fattah
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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ECN 190/TTP 215 Lecture 16

Transportation Economics:
Highway Congestion
Highway Travel: Congestion

• Let V=volume (number of vehicles passing a


given point per hour)
• D=density (number of vehicles per unit
distance)
• S=speed. Then these three variables must
satisfy the relation:
• V = DS
• But they are inter-related! Draw this as:
Congestion graphs:
• Maximum volume Vm, density Dm, speed S0

• Vm left (upper) branch is congestion


• right (lower)branch is hyper-congestion
V
D Dm
a. Flow vs. Density

S0 S0

S S

D Dm V Vm
b. Speed vs. Density c. Speed vs. Flow
Time spent on each trip:

• The time spent on each trip is inversely


proportional to speed, or 1/S.
• We will focus on the “congestion” portion of
the speed vs. flow graph, so that 1/S is
increasing in the flow V
• Suppose there is a (fixed) consumer cost of
time, and then evaluate the average costs of
time per trip, c(V)
Average costs of time spent, E.g. 1:
k
c(V; VK ) = c 0 + c 2f (V / VK ) = c 0 + c 2 (V / VK )
• with VK=capacity. Total costs are:
k
C(V; VK ) = V[c0 + c 2 (V / VK ) ]
• marginal costs are:

k
MC = ∂ C(V; VK ) / ∂ V = c0 + (k + 1)c 2 (V / VK )
• decreasing returns for k>0;
Costs of time:
• This gives us cost curves:
Cost per vehicle

MC

kc2
AC
c2
C0

VK Volume
Average costs of time spent, E.g. 2:
• Average costs,

c 0 if V/VK ≤ 1
c(V; VK ) = 

c 0 + c 2 (V / VK − 1) if V/VK > 1.
• marginal costs are,


c 0 if V/VK ≤ 1
mc = 

c 0 + c 2 (2V / VK − 1) if V/VK > 1.
Cost of time:
• This gives us cost curves:

Cost per vehicle


MC

Slope=2c2/Vk
c0+c2
AC
Slope=c2/Vk
c0
VK Volume
Social costs of automobile travel
Type of cost Cost ($ per vehicle-mile in
1989 US prices)
Costs borne mainly by Highway users in aggregate:
(1) Running costs 0.068
(2) Vehicle capital 0.188
(3) Time 0.120
(4) Schedule delay 0.066
Costs borne partially by non-users:
(5) Accidents 0.179
(6) Parking (CBD fringe) 0.136
Total:
Without parking 0.621
With parking 0.757
Social Optimum
V
• Social Benefits, B = ∫ P(V′)dV′
• Social costs are, 0

C = Vc (V / Vk ) + ρK (Vk )

• Net social benefits, choose V and VK to


V
NSB = ∫ P(V′)dV′ − Vc(V / VK ) − ρK (VK )
0
Social Optimum
• Choose V to max Net social benefits:

dNSB V
= P(V) − [c(V / VK ) + c'⋅ ] = 0
dV VK
• or,
V
P(V) = c(V / VK ) + c'⋅
VK
• Price = Waiting Cost + Toll
Average costs of time spent, E.g. 1:
k
c(V; VK ) = c0 + c 2 (V / VK )
• Toll is:

k
Toll = (V / VK )c' = k (V / VK )

= MC − AC
• Toll is increasing in traffic volume;
• Toll is decreasing in capacity.
Illustrate toll:
•
Cost per vehicle

MC
Toll
AC

C0 D

V1 V
0 Volume
Average costs of time spent, E.g. 2:
• Average costs,

c 0 if V/VK ≤ 1
c(V; VK ) = 

c 0 + c 2 (V / VK − 1) if V/VK > 1.
• marginal costs are,


c 0 if V/VK ≤ 1
mc = 

c 0 + c 2 (2V / VK − 1) if V/VK > 1.
Average costs of time spent, E.g. 2:
• toll is,

0 if V/VK < 1

toll =  P - c 0 if V/VK = 1
c (V / V ) if V/VK > 1.
 2 K
• Results: toll is zero at less than capacity, and increasing in
V at more than capacity
• (takes range of values < c2 at capacity)
Illustrate toll:
•
Cost per vehicle
MC

Slope=2c2/Vk

c0+c2
AC
Toll
Slope=c2/Vk
c0

VK V0 Volume
Social Optimum
• Choose VK to max Net social benefits:

2
dNSB V
= c'⋅ − ρK ' (VK ) = 0
dVK 2
• or,
VK
V
V ⋅ c'⋅ = ρVK ⋅ K ' (VK )
• V Toll = V K
? Capital Costs
⋅
Social Optimum
• Measure returns to scale as:

K / VK
sK =
K′(VK )
• then,
V
V ⋅ c'⋅ = ρ ⋅ K (VK ) / s K
VK
• V ⋅Toll = Capital Costs / sK
Results:

• With constant returns in construction,


sK=1, optimal tolls will just be enough to
cover capital costs
• With increasing returns in construction,
sK>1, optimal tolls will not be enough to
cover capital costs
• Look at evidence on capital costs:
Highway capital costs (1989 U.S.)
Degree of Rural Urban Central
Urbanization city
Width (lanes) 6 4 6 8 6
EXPRESSWAY Study 1:
Cost/lane-mile ($1000s):
Construction 916 1740 1436 1283 1955
Land 23 131 108 96 244
Total 939 1871 1543 1380 2199
Returns to Scale: 1.47 2.11 1.74 1.55 1.89
EXPRESSWAY Study 2:
Cost/lane-mile ($1000s):
Construction 1194 1570 1551 1537 4730
Land 358 507 501 497 3264
Total 1552 2078 2052 2034 7994
Returns to Scale: 1.03 1.03 1.03 1.03 1.03
Policies used in California:

• Gasoline taxes
• Vehicle registration fees
• Driver’s license fees
• Vehicle-weight fees (trucking)
• Tolls
• Not related to transportation:
• Sales taxes, and bonds
Gasoline taxes

• These are specified as cents per gallon,


so they do not keep up with inflation
• have risen from 2 cents in 1923 to
nearly 20 cents today
• Percentage tax rate has fluctuated from
high of 35% in 1935, ‘55, ‘65 to low of
10% in 1991, and about 20% in 1997
Gasoline taxes

• Relative to 1950 the amount of gasoline


taxes collected per vehicle mile of travel
in California has fluctuated:
• upwards to +40% in 1965
• then downward steadily to -60% in 1980
• slightly upwards to -40% in 1994
Sales taxes

• Beginning in 1960’s, frequency and size


of gasoline tax increases diminished,
causing funding shortfalls
• 18 countries authorized use of
supplemental sales taxes, with revenue
targeted to transportation projects
• in 1996-97, these raised $400 mill, about
25% of revenue from gas taxes
Tolls

• Optimal tolls should higher at peak hours


and on crowded roads, and lower when
and where congestion is absent
• E.g. State Route 91 in Orange County
and Interstate 151 in San Diego
• These can greatly affect congestion
• Also have bridge tolls (but probably do
little to affect congestion)
Finding 1

• California does not face an immediate


crisis of highway funding, but revenues
will not keep up with program needs.
• Democrats: propose bond issue ($8 bill)
• Also propose reducing to simple majority
the vote needed to approve half-cent
sales taxes funding transport (&
expanding counties with these taxes)
Finding 1 (cont’d)

• Republicans:
• Object to changing the rules governing
tax increases (Prop. 218); also object to
bond financing
• Propose to divert $800 million in
gasoline taxes that now go to state
general fund, and target for transport
Finding 2

• There is a trend towards decreased


reliance on user fees, and this should
be reversed
• Increase gasoline tax
• New technologies such as electronic toll
payment are possible (and are used in
Singapore, for example)
Finding 3

• Part of the vehicle license fee should be


used as a highway user fee
• Vehicle license fee raised $3.6 bill in1996-97,
comparable to state and federal gas taxes.
• This is treated as a property tax, used to fund
various programs unrelated to highways
• The vehicle license feel is due to be reduced
by 2/3 in five years (if economy grows)
Finding 4

• State system for user fees on heavy


vehicles need to be overhauled
• Fees currently based on unladen
vehicle weights and number of axles,
not loaded weights which determine
damage to pavement
• Trucking industry a strong lobby here

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