Analyses of pricing policies in a second-best solution context

Road pricing is currently considered one of the most powerful tools for managing transport demand in urban areas, especially to reduce traffic congestion and rebalance the modal split between private vehicles and transit systems. User behaviour brings about a User Equilibrium (UE) condition, which has two main aspects: when making individual mobility choices, users select a travel alternative so that they maximise their own utility, which does not correspond to the overall utility; furthermore, users do not take account of external costs (such as air pollution, noise pollution and accidents). In order to achieve an equilibrium flow pattern, indicated in the literature as a System Optimum (SO) or System Equilibrium (SE) condition, which maximises social surplus and internalises external costs, it is necessary to charge, for each network link, a toll equal to the difference between the marginal social cost and average individual cost (Pigou, 1920; Beckmann et al., 1956). Toll introduction allows both user travel choices to be controlled and external costs to be internalised. The condition where all prices are equal to marginal costs is referred to as "first-best condition" in the economics literature. For several technical reasons, as well as political and social ones, it is not possible to charge first-best tolls but we can use a second-best strategy, such as cordon pricing and/or parking pricing policies. Therefore the first-best solution becomes an upper bound of the second-best approach.In this paper, we investigate the possibility of applying some second-best solutions, such as cordon pricing, destination-based parking pricing (traditional parking pricing policy) and parking pricing based on both trip origin and destination (origin-destination parking pricing policy as proposed by D'Acierno et al., 2006). In particular, in order to seek the solution which comes as close as possible to the first-best solution, the different policies were compared and for each of them three possible cases were taken into account: one toll in the whole day, a variable toll depending on peak or off-peak times and a toll based on user (or vehicle) permanence in a predetermined area. Since in the literature several authors (such as de Palma et al., 2006; Rouwendal et al., 2006) have taken an interest in the path implementation problem, some implementation paths obtained by combining the above pricing strategies were studied to approximate the system in its final condition to the first-best condition.For price computations, we formalise an optimisation model based on a multimodal network with elastic demand (as proposed by Montella et al., 2000; Cascetta, 2001; Gentile et al., 2005) where the design variables are road (and/or parking) pricing, transit fares and public transport frequencies. In particular, we investigate the possibility of using part of the revenues from road pricing to provide greater funding to public transport, thereby improving the quality of service (for instance, with an increase in transit frequencies which reduces waiting times at bus stops/stations). This approach tends to increase pricing policy acceptability since it would not be a simple "tax" for road users but a tool for increasing social welfare. In particular, in the paper we seek the best share of pricing revenues to provide in transit system management for increasing user accessibility on all transportation modes.Finally, in our model, unlike those proposed elsewhere (such as Huang, 2002, and Ferrari, 2005), three transportation modes belonging to the user's travel choice set are taken into account: road, transit and pedestrian systems. This three-mode approach is motivated by considering effects of pricing policies on systematic trips. Indeed, the two-mode approach (road and transit system) with elastic demand in the case of increase in fares of all considered modes yields a decrease in travel demand that is inconsistent with the assumption of systematic trips (users have to go to work or school independently of pricing policies). In real cases, the number of systematic trips in a short-term analysis has to be considered constant and independent of pricing policies. Hence, a three-mode approach, redirecting commuters onto pedestrian systems with the consequent increase in travel times, can be considered more plausible and representative of the real world.