Research / Weiss Fund Supported ResearchJan 17, 2018

Peak-Hour Road Congestion Pricing: Experimental Evidence and Equilibrium Implications

Gabriel E. Kreindler

The textbook policy response to traffic externalities is congestion pricing. However, quantifying the welfare consequences of pricing policies requires detailed knowledge of commuter preferences and of the road technology. I study the peak-hour traffic congestion equilibrium using rich travel behavior data and a field experiment grounded in theory. Using a newly developed smartphone app, I collected a panel data set with precise GPS coordinates for over 100,000 commuter trips in Bangalore, India. To identify the key preference parameters in my model – the value of time spent driving and schedule flexibility – I designed and implemented a randomized experiment with two realistic congestion charge policies. The policies penalize peak-hour departure times and driving through a small charged area, respectively. Structural estimates based on the experiment show that commuters exhibit moderate schedule flexibility and high value of time. In a separate analysis of the road technology, I find a moderate and linear effect of traffic volume on travel time. I combine the preference parameters and road technology using policy simulations of the equilibrium optimal congestion charge, which reveal notable travel time benefits, yet negligible welfare gains. Intuitively, the social value of the travel time saved by removing commuters from the peak-hour is not significantly larger than the costs to those commuters of traveling at different, inconvenient times.