Demand, supply, and pricing in urban road transport: The case of Ho Chi Minh City, Vietnam

Abstract

Traffic and household survey data from 1992–1996 are used to derive the optimal congestion toll for major arterials in Ho Chi Minh City (HCMC), Vietnam. Speed-Flow Diagrams were derived for HCMC’s four main arterials. A multinomial logit model of mode choice was estimated using three separate data sets to find commuter’s value of time. An aggregate trip generation model was estimated to find the price elasticity of demand. Congestion tolls, potential revenues, and welfare benefits were calculated. Specifically, results show a value of time (VOT) of 45,559 Dong (around 2–3 times wage), and a price elasticity of demand of −.88. The optimal congestion tolls per kilometer were found for different vehicles. Estimated revenues from pricing the arterials would be US$5.7–14.2 million a year, as compared to current expenditures of around US$12 million a year. The welfare benefits of time savings alone are US$550,000-US$3.5 million a year. This estimate does not include savings from the efficient use of fuel, reduced pollution, reduced health costs, and the improved quality of life. Optimal congestion tolls may be derived in a fairly easy and inexpensive way. Moreover, the welfare and revenue benefits may be large, even for low income countries.