Who gains and who loses from congestion pricing in a monocentric city with a bottleneck?

Abstract

This study develops a model in which heterogeneous commuters choose their residential locations and departure times from home in a monocentric city with a bottleneck. We show that commuters sort themselves both temporally and spatially according to their value of time and flexibility at the equilibria with and without optimal congestion pricing. These two equilibria exhibit fundamentally different properties, indicating that congestion pricing alters the urban spatial structure. We then consider two cases wherein richer commuters are either more flexible or less flexible and demonstrate that (a) congestion pricing makes cities denser and more compact in the former, whereas it causes cities to become less dense and to expand spatially in the latter; (b) in both cases, pricing helps rich commuters but hurts poor commuters. We further reveal that expanding capacity financed by the revenue from congestion pricing could be regressive in a city where richer commuters are less flexible.