How varies optimal welfare pricing with income distribution? The case of the untolled alternative

• Main Authors: Ortega, Alejandro (Author), Vassallo, Jose Manuel (Author), Perez, Juan Ignacio (Author)
• Format: Article
• Language: English
• Published: 2014-10.
• Subjects: Article
• Online Access: Get fulltext

 In some countries, such as Spain, it is very common that in the same corridor there are two roads with the same origin and destination but with some differences. The most important contrast is that one is a toll highway which offers a better quality than the parallel road in exchange of a price. The users decide if the price of the toll worth to pay for the advantages offered. This problem is known as the untolled alternative and it has been largely studied in the academic literature, particularly related to economic efficiency and the optimal welfare toll. However, there is a gap in the literature academic regarding how affects income distribution to the optimal toll. The main objective of the paper is to fill this gap. In this paper a theoretical model in order to obtain the optimal welfare price in a toll highway that competes for capturing the traffic with a conventional road is developed. This model is done for non-usual users who decide over the expectation of free flow conditions. This model is finally applied to the variables we want to focus on: average value of travel time (VTT) which is strongly related with income, dispersion of this VTT and traffic levels, from free flow to congestion. Derived from the results, we conclude that the higher the average VTT the higher the optimal price, the higher the dispersion of this VTT the lower the optimal price and finally, the more the traffic the higher the optimal toll