Optimal Welfare Price for a Highway Competing with an Untolled Alternative: Influence of Income Distribution

Abstract

In some countries, it is common for two roads with the same origin and destination to compete in the same corridor. Usually one of the roads is a toll highway of better quality, whereas the parallel single road is toll-free. The users have to decide whether it is worth paying for the advantages offered by the toll road. This problem, known as the untolled alternative, has been studied extensively. Particular attention has been paid to calculating the optimal welfare toll that maximizes the economic efficiency. However, there is a gap in the literature regarding how the income distribution affects the optimal toll. The main objective of this paper is to add knowledge in that area by analyzing the influence of the distribution of the values of travel time (VTT) of the users, which is closely related to their income distribution, on the optimal toll price. To solve this problem, the authors defined a mathematical model aimed at obtaining the optimal welfare price for this kind of corridor under the hypothesis that the drivers assume that the average flow conditions will prevail. Under the assumptions made in the paper and for the type of network studied, the results showed that the higher was the average VTT, the higher was the optimal price; and the higher was the dispersion (variance) of this VTT, the lower was the optimal price.