Integration of Congestion Pricing and Intertemporal Preference Rate in Social Welfare Function

Abstract

Many researchers have used theoretical or empirical measures to assess social benefits in transport policy implementation. However, few have measured social benefits by using discount rates, including the inter-temporal preference rate of users, the private investment discount rate, and the intertemporal preference rate of the government. In general, the social discount rate used is the same for all social actors. This paper aims to assess a new method by integrating different types of discount rates belonging to different social actors to measure the real benefits of each actor in the short term, medium term, and long term. A dynamic simulation is provided by a strategic land use and transport interaction model. The method was tested by optimizing a cordon toll scheme in Madrid, Spain. Socioeconomic efficiency and environmental criteria were considered. On the basis of the modified social welfare function, the effects on the measure of social benefits were estimated and compared with the classical welfare function measures. The results show that the use of more suitable discount rates for each social actor had an effect on the selection and definition of optimal strategy of congestion pricing. The usefulness of the measure of congestion toll declines more quickly over time. This result could be the key to understanding the relationship between transport system policies and the distribution of social actors’ benefits in a metropolitan context.

Evaluating the equity effects of road-pricing in the European urban context – The Madrid Metropolitan Area

“…The quantitative analysis involved exploitation of the Madrid Mobility Regional Survey data using a micro simulation model (MARS) (Pfaffenbichler et al 2008, Guzman et al, 2013. In the absence of individualised travel survey data, the model uses a generalised cost measure of accessibility (which captures both travel times and transport costs) disaggregated by low and high income areas to estimate the economic burden of a road pricing scheme on different road users.…”

“…The model is able to support policy evaluation and scenario testing over short, medium and long-term horizons. It uses the concepts of causal loop diagrams (CLD) from the system dynamics, which provide the basis to study the cause and effect among the variables of the transportation system and the land-use (table 2) (Guzman et al 2013). Table 3 identifies the current modal split of trips within the MMA.…”

“…Table 3 identifies the current modal split of trips within the MMA. Source Guzman et al 2013 An extensive model-testing program was performed. In a back-casting exercise the MARS simulation results were compared with empirical data.…”

Transport equity analysis

“…Another important issue is the choice of an appropriate discount rate to be used in the CBA, which may have a significant impact on projects' efficiency and on intergenerational equity effects (Di Ciommo, de la Hoz, & Guzman, 2014;Guzmán, Di Ciommo, & de la Hoz, 2013). A related issue is the life cycle used in CBA for the calculation of benefits.…”

A Combined Model of Congestion Toll Pricing Based on System Optimization with Minimum Toll

“…Moreover, people do not want to pay for something they used before as a free service [8]. Although this may be true, but Guzman et al [9] find a new method by dynamic simulation to measure the real benefits of each person in the short, medium, and long term due to pricing, by considering socio-economic efficiency and environmental criteria to optimize a cordon tolls scheme. Theory and practice have shown that receiving tolls, when designed and determined properly, can play a great role in reducing traffic congestion [10].…”