Urban highway congestion: An economic analysis of second-best congestion pricing schemes

This thesis provides an economic analysis of second-best congestion pricing schemes for an urban highway system in which congestion tolls are not allowed on a major portion of the system due to technical and/or political constraints. The analysis focuses on the efficiency issue of congestion pricing--the effectiveness of the congestion pricing in reallocating traffic volumes to maximize the social welfares. The second-best congestion pricing problem is studied by comparing it with two other regimes: the first-best regime in which efficient tolls are imposed on all routes and the no-toll regime in which no toll is imposed.; The main contribution of this study is to introduce traveler's time of trip choice into previous route choice models for a single peak period. The congestion pricing models developed in the study provide an effective tool for assessing the effectiveness of the alternative congestion pricing schemes. The main findings from the analysis results are: (1) the second-best scheme is effective but less efficient than the first-best scheme in reallocating traffic volumes; (2) the second-best tolls are appreciably smaller than the first-best tolls; (3) the second-best policy is able to generate welfare gains against the no-toll policy, but the gains yielded by the second-best are less than half of the welfare gains by the first-best scheme. Therefore, the failure to impose a congestion toll on a major part of the network may result in a loss of the welfare gains that are possible with a complete set of first-best tolls.