HOT or Not: Driver Elasticity to Price and Alternative Pricing Strategies on the MnPASS HOT Lanes

Congratulations to Michael Janson for successfully completing and defending his Master’s Thesis HOT or Not: Driver Elasticity to Price and Alternative Pricing Strategies on the MnPASS HOT LanesJansonBoyce HotOrNotPoster

The Minnesota Department of Transportation (MnDOT) has added MnPASS High Occupancy Toll (HOT) lanes on two freeway corridors in the Twin Cities. While not the first HOT lanes in the country, the MnPASS lanes are the first implementation of road pricing in Minnesota and possess a dynamic pricing schedule. Tolls charged to single occupancy vehicles (SOVs) are adjusted every three minutes according to HOT lane vehicle density. Given the infancy of systems like MnPASS, questions remain about drivers responses to toll prices. Three field experiments were conducted on the corridors during which prices were changed. Data from the field experiments as well as two years of toll and traffic data were analyzed to measure driver responses to pricing changes. Driver elasticity to price was positive with magnitudes less than 1.0. This positive relationship between price and demand is in contrast with the previously held belief that raising the price would discourage demand. In addition, drivers consistently paid between approximately $60-120 per hour of travel time savings, much higher than MnDOT’s value of time (VOT) of $15/hr. Reasons for this include the value drivers place on reliability, a misperception about the actual time savings and that MnPASS users have a greater VOT than the average driver. Four alternative pricing strategies are then proposed. These pricing strategies were tested using a HOT lane choice model based on previous research. The share of transponder owning SOVs using the MnPASS lane was measured against price producing positive elasticity values at lower prices and negative elasticity values at higher prices. MnPASS lane usage rises with price at lower tolls due to the increased time savings benefit but is eventually outweighed by the price, causing the lane share to decrease at higher tolls.

Michael is now working at SRF.