Why Congestion Tolling could be Good for the Consumer: The Effects of Heterogeneity in the Values of Schedule Delay and Time on the Effects of Tolling

This paper analyses the efficiency and distributional impacts of congestion pricing, in the bottleneck model, with continuous heterogeneity in the value of time and schedule delay. The welfare gain of a time-variant toll decreases with the heterogeneity in the value of time, because the marginal external costs from congestion decrease. This welfare gain increases with heterogeneity in the value of schedule delay. With heterogeneity in the value of schedule delay, tolling makes the arrival ordering more efficient, and this lowers scheduling costs. If there is not much more heterogeneity in the value of time than in the value of schedule delay, then first-best tolling decreases the generalised price for most users. We find that the consumer surplus losses or gains from first-best tolling without rebates are not strictly monotonic in the value of time, because the value of schedule delays also determines such gains or losses. The greatest losses are not incurred by drivers with the lowest value of time, but by users with an intermediate value of schedule delays and the lowest value of time consistent with that value of schedule delays. Further, the lowest values of time are among those who gain most from a public pay-lane. JEL codes: R41, R48, H23