This research seeks to examine road pricing on a network of autonomous highway links. "Autonomous" refers to the links' being competitive and independent and having the objective of maximizing their own profits without regard for either social welfare or the profits of other links. The principal goal of this research is to understand the implications of the adoption of road pricing and privatization on social welfare and the distribution of gains and losses. The specific pricing strategies of autonomous links are evaluated first under the condition of competition for simple networks. An agent-based modeling system is then developed; it integrates an equilibrated travel demand, route choice, and travel time model with a repeated game of autonomous links setting prices to maximize profit. The levels of profit, welfare consequences, and potential cooperative arrangements undertaken by autonomous links are evaluated. By studying how such an economic system may behave under various circumstances, the effectiveness of road pricing and road privatization as public policy can be assessed. Roadway congestion, air pollution from cars, and the lack of resources to finance new surface transportation options challenge many nations. Road pricing, the practice of charging users a monetary toll in addition to the "cost" of time spent traveling, has been suggested as a solution to these problems. Although tolls are common on certain expensive facilities such as tunnels and bridges, they are less common on streets and highways. However, a new generation of private toll roads are being deployed, most recently SR-91 in southern California and the Dulles Greenway in northern Virginia. There have been a few trials of areawide pricing schemes, such as in Singapore and London, and many other schemes have been proposed but not implemented. The combination of private and competing toll roads, ubiquitous over an area, would represent a comprehensive market-oriented approach to urban transportation problems, but its impacts are unclear. This research seeks to examine road pricing on a network of autonomous highway links with the goal of understanding the social welfare and equity implications of widespread adoption of road pricing and privatization under various circumstances. "Autonomous" refers to the links' being competitive and independent and having the objective of maximizing their own profits without regard for either social welfare or the profits of other links, though possibly being subject to regulatory constraints. The basic approach taken is to begin with the link as the most elemental unit of analysis and aggregate to more complex interactions, including revenue and cost sharing. A realistic network of highway links is not, in the economists' terminology, perfectly competitive. Because a link uniquely occupies space, it attains some semblance of monopoly power. Although in most cases users can switch to alternative links and routes, those alternatives will be more costly to the user in terms of travel time. Theory suggests that excess profits will attract new entrants into a market, but the cost of building a new link is high, indicating barriers to entry not easily overcome. Although roads are generally treated as public goods, they are both competitive when congested and excludable. These factors indicate that it is feasible to consider them for privatization. Several advantages are often associated with privatization: increasing the efficiency of the transportation system through road pricing, providing incentives for the facility operator to improve service through innovation and entrepreneurship, and reducing the time and cost of building and expanding infrastructure. Most trials of road pricing suppose either tolls on a single facility, or areawide control. Theoretical studies assume marginal cost pricing on links and do not discuss ownership structure. However, in other sectors of the economy, central control of pricing through either government ownership or regulation has proven to be less effective than decentralized control for serving customer demands in rapidly changing environments. Single prices systemwide do not provide as much information as link-specific prices. Links that are priced only at marginal cost, the optimal solution in a first-best, perfectly competitive environment, constrain profit. Although excess profit is not socially optimal in the short term, over the longer term, it attracts capital and entrepreneurs to that sector of the economy. New capitalists will both invest more in existing technology to refine its deployment and enter the sector as competitors, trying to gain from a spatial monopoly or oligopoly. Furthermore, new capitalists may also innovate and thereby change the supply (and demand) curves in the industry. By examining road pricing and privatization from a decentralized point of view, the issues associated with a marketplace of roads can be more fully explored, including short-and long-term distributional consequences and overall social welfare. The main contribution of this research will be to approach the problem from a theoretical and conceptual level and through the conduct of simulation experiments. Specifically, an agent-based simulation model is developed in this study that incorporates travel demand estimation, road maintenance and construction cost functions, pricing and financing strategies of autonomous links, and network performance evaluation. The simulation model considers both short-term traffic equilibrium and long-term supply and demand equilibrium in a highway network; it therefore more completely assesses the consequences of alternative ownership structures and pricing strategies. Gomez-Ibanez and Meyer (1) have reviewed transportation privatization at an empirical level, though the cases of roadway privatization are few and not entirely successful. Even if roadways were privatized, it is unlikely that their price structure would be left entirely to the
A decentralized, agent-based approach to road pricing is shown in REF , where the authors compare the performance of autonomous links and centralized control on capacity expansion of a highway network.
Road pricing with autonomous links
Journal of the Transportation Research Board
Economics