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Revenue maximisation in this case is not a great goal. The idea behind congestion pricing is to price-ration road-usage so that people make socially optimal use
by spangry 4y ago
Revenue maximisation in this case is not a great goal. The idea behind congestion pricing is to price-ration road-usage so that people make socially optimal use of roads (which in theory is achieved by setting prices at marginal social cost). Pricing should vary in line with road congestion so that people respond by altering their road usage patterns (e.g. shifting working hours so their commute is outside of peak times, make road deliveries in non-peak hours etc.)
If you go for revenue maximisation you won't be setting prices at the social welfare maximising level. Also, you'd probably want to charge higher prices for heavier vehicles as they cause more road damage per unit of distance travelled.
- kqr 4y ago> (which in theory is achieved by setting prices at marginal social cost). This sounds really clever but I don't get it. Do you have a link to a more thorough explanation?