The Welfare Effects Of Congestion Tolls With Heterogeneous Commuters

Recent success in introducing road pricing, as well as recent polls suggest that road pricing schemes are politically viable if a large majority of drivers benefit. In this paper we analyze the welfare effects of an optimal time-varying toll impose during the morning commute. The toll tends to benefit drivers with high unit values of travel time and schedule delay. Other drivers can become worse off even with an equal per-capita rebate. A capacity expansion benefits drivers in proportion to their trip costs. If initial capacity is sufficiently small, a toll-financed expansion leaves all drivers better off.

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