aDepartment of Civil Engineering, The Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong, PR China;bCentre for Transport Studies, University College London, Gower Street, London WC1E 6BT, United Kingdom
Abstract:
This paper deals with the following question associated with congestion pricing in a general network with either fixed or elastic travel demand: what is the maximum efficiency loss of a general second-best pricing scheme due to inexact marginal-cost pricing in comparison with the first-best pricing or system optimum case? A formal answer to this question is provided by establishing an inefficiency bound associated with a given road pricing scheme. An application of the methods is provided for the practical trial-and-error implementation of marginal-cost pricing with unknown demand functions.