Alternative High Occupancy/Toll Lane Pricing Strategies and their Effect on Market Share

| David Levinson

Recent working paper:

Janson, M. and Levinson, D. (2014) Alternative High Occupancy/Toll Lane Pricing Strategies and their Effect on Market Share

Price vs. Density
Price vs. Density
  • High Occupancy/Toll (HOT) Lanes typically charge a varying to single occupant vehicles (SOVs), with the toll increasing during more congested periods. The toll is usually tied to time of day or to the density of vehicles in the HOT lane. The purpose of raising the toll with congestion is to discourage demand enough to maintain a high level of service (LOS) in the HOT lane. Janson and Levinson (2014) demonstrated that the HOT toll may act as a signal of downstream congestion (in both general purpose (GP) and HOT lanes), causing an increase in demand for the HOT lane, at least at lower prices. This paper builds off that research and explores alternative HOT lane pricing strategies, including the use of GP density as a factor in price to more accurately reflect the value of the HOT lane. In addition, the paper explores the potential effect these strategies would have on the HOT lane vehicle share through a partial equilibrium analysis. This analysis demonstrates the change in demand elasticity with price, showing the point at which drivers switch from a positive to negative elasticity.

4 thoughts on “Alternative High Occupancy/Toll Lane Pricing Strategies and their Effect on Market Share”

  1. What struck me in this paper was the low percentage of cars equipped with transponders. Few people, other than people who use the HOT lanes regularly, own transponders. In south Florida and the New York City area, for example, the ubiquity of toll bridges and highways means that most cars have transponders. I would expect this condition to yield a much higher congestion-elasticity of demand for the toll lanes.

    A separate thought: Wouldn’t a revenue-maximizing toll lane operator deliberately put random fluctuations into the toll rates? That would force uncertainty-averse drivers to use the toll lanes every day, rather than using them only on days when high tolls signal delay in the general-purpose lanes.

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  2. We only have two corridors in the Twin Cities. I agree as the network of toll lanes gets built out (or if MBUF is ever implemented), transponder ownership increases. Alternatively if new toll collection technologies are used (AVI, e.g.) that problem goes away.

    Random fluctuations in the toll rate might work for a short time, or unusually, but that would have to be kept down. The better solution is to just have real-time travel time information posted on variable message signs (or in-vehicle GPS systems) so people can make informed decisions.

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  3. You might have missed my point. A pure revenue maximizer (a private owner, not, presumably, a public agency) wants the public to make uninformed decisions. Since the public is willing to pay for certainty of travel time, it will pay more if travel time in the free lanes is more uncertain.

    The aftermath of electricity deregulation shows that it’s better to think about these pathological behaviors before the market-based system opens than after.

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  4. I think you missed mine. Expectations are formed by experience. Systematically misleading toll-users in a noticeable way about the value received will eventually get discovered, and people will see that the value is independent of the price and may choose not to use the facility.

    I would not assume public agencies are not profit-maximizing. Many are.

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