Accounting for travel time variability in the optimal pricing of cars and buses

Abstract

A number of studies have shown that in addition to the common influences on mode, route and time of day of travel choices such as travel time and cost, travel time variability plays an increasingly important role, especially in the presence of traffic congestion on roads and crowding on public transport. The dominant focus of modelling and implementation of optimal pricing that incorporates trip time variability has been in the context of road pricing for cars. The main objective of this paper is to introduce a non-trivial extension to the existing literature on optimal pricing in a multimodal setting, building in the role of travel time variability as a source of disutility for car and bus users. We estimate the effect of variability in travel time and bus headway on optimal prices (i.e., tolls for cars and fares for buses) and optimal bus capacity (i.e., frequencies and size) accounting for crowding on buses, under a social welfare maximisation framework. Travel time variability is included by adopting the well-known mean-variance model, using an empirical relationship between the mean and standard deviation of travel times. We illustrate our model with an application to a highly congested corridor with cars and buses as travel alternatives in Sydney, Australia. There are three main findings that have immediate policy implications: (i) including travel time variability results in higher optimal car tolls and substantial increases in toll revenue, while optimal bus fares remain almost unchanged; (ii) when bus headways are variable, the inclusion of travel time variability as a source of disutility for users yields higher optimal bus frequencies; and (iii) including both travel time variability and crowding discomfort leads to higher optimal bus sizes. AcknowledgementsPart of this research was developed while the first author was with the Institute of Transport and Logistics Studies in Sydney. This study is supported in part by the Australian Research Council Discovery Program Grant DP120100201 titled: 'Valuation of Service Reliability and Crowding under Risk and Uncertainty: Neglected Drivers of Demand for Public Transport', and by the Complex Engineering Systems Institute, Chile (Grants ICM P-05-004-F, CONICYT FBO16). We thank NSW Roads and Maritime Services (RMS) for providing the data to estimate the travel time variability functions in Sydney, and the referees for their extensive and invaluable comments. 1 IntroductionTravellers do not like wasting time in traffic or waiting at a bus stop. A major element of transport research has focussed on estimating and monetising the (average) time savings of infrastructure investment and the demand management measures targeted at reducing travel times. We are, however, increasingly aware that users are not only willing to pay for a shorter travel time, but also for a more reliable trip. Uncertain travel times cause users to arrive earlier or later than expected at their destination, and influences mode choice, route choice and departure time decisions; suggest...

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