THE GENERALIZED SECOND-BEST NETWORK CONGESTION PRICING PROBLEM
Erik T. Verhoef · RePEc: Research Papers in Economics · 2000
This paper considers the second-best problem where not all links of a congested transportation network can be tolled.The paper builds on earlier work in which the secondbest tax rule for this problem was derived for general static networks, so that the solution presented is valid for any graph of the network, and for any set of tolling points available on that network.The solution is now applied in an illustrative simulation model, in which various second-best problems can be studied that might arise with the implementation of different archetype pricing schemes.Apart from the benchmark of first-best pricing, these include for instance a toll-cordon, parking policies in the city centre, and pay-lanes and 'free-lanes' on major roads feeding into the city.An exploratory analysis is given of a possible method for selecting the optimal location of toll points in case not all links can be tolled.