Urban transportation system optimum: The effect of accounting for the

Abstract

We use an iterative methodology to calculate Pigouvian tolls when the street is shared by cars and buses. We compare scenarios where: 1) the toll is calculated, conventionally, considering only the externality over other vehicles; 2) the toll is calculated considering the impact over other vehicles’ passengers; 3) no tolls are applied; 4) no tolls are applied, but some lanes or streets are reserved for buses. The methodology is applied first to a synthetic-model that considers homogeneity of demand and some level of heterogeneity of supply. Then, the methodology is extended to a city-model, a simultaneous four-stage model calibrated with real data from Santiago, Chile. Results show that when the externality over passengers is considered, car tolls in roads of mixed-use are significantly higher than conventionally estimated and, consequently, car flows shrink on those roads. Simulation results also show that the outcome of the reservation of capacity for buses depends on a careful design of this policy and could range from a social detriment, to be significantly superior to Pigouvian pricing. Experiments also show that, if bus’ paths are fixed, tolls calculated considering the externality over vehicle’s users may result in a social detriment. Finally, all Pigouvian pricing scenarios in the city-model resulted in a reduction in social welfare. This remarkable result can be attributed to: 1) the fact that the citymodel tends to simile general equilibrium, whereas Pigouvian tolls are calculated from a partial equilibrium perspective; 2) limitations of the city-model or a manifestation of Coase’s counterexample for Pigouvian taxation, resulting from the fact that agent’s opportunity cost is heterogeneous. We finish discussing the impact of these findings in policy analysis.