Welfare Effects of Congestion Pricing and Transit Services in Multiclass Multimodal Networks

Abstract

This paper analyzes the welfare effects of congestion pricing with the use of a general bimodal network with heterogeneous users. Transit service is modeled as a cheaper (because of its lower operating cost) and undesirable (because of the relatively long travel time) alternative to the highway network and is added to an origin–destination pair as an exclusive link. The analysis characterizes the critical users—those who suffer the greatest loss from pricing—as those who experience the least change in travel time after pricing. Accordingly, the paper shows that critical users could be rich, poor, or middle class, depending on their origin and destination. This finding highlights the spatial heterogeneity of distributional effects. Furthermore, numerical experiments indicate that (a) those with a low value of time tend to benefit more from greater coverage of transit services than those with intermediate values of time; (b) in the presence of poor transit coverage, users with access to transit may share a disproportionally greater burden for the congestion relief generated by an optimum toll for the system; and (c) the optimum toll for the system generally leads to a welfare gap between the rich and the poor larger than those of toll schemes that have proportionally lower magnitudes and achieve smaller efficiency improvements.