Peak Road Pricing

Quite a while back, I suggested that a better use for HOV lanes would be to charge money for their use, thereby creating a new revenue stream to increase future freeway capacity and beginning to experiment with peak pricing.

Several years ago, I sent in a proposal to the Arizona
Dept. of Transportation for their new HOV lanes in the Phoenix area,
though I never got a response back.  I suggested that HOV lanes
probably did not really increase carpooling, since they probably just
shifted vehicles that would have already been carrying 2+ people into
the faster lane.  Why should I get this artificial subsidy of a
dedicated lane when I am driving my kid to a soccer game but not when I
am driving myself to do productive work?  Either way, the lane is not
changing my behavior.

Anyway, I suggested that instead, AZ DOT should create a
number of special passes for exclusive use of the HOV lane.  The number
of passes should be set as the largest number that could be issued
while keeping the HOV lane moving at the speed limit at rush hour.
Maybe 5000?  Anyway, they would have the stats to set the number, and
it could be adjusted over time.  I proposed that they then auction off
these passes in a dutch auction once a year.  I posited that the
clearing price might be as high as $1000, thus raising $5,000,000 a
year that could be used for other transportation projects.

I suggested that $1000 as the clearing price might be low.  For some workers and businesses, 20 saves minutes a day might be worth thousands of dollars a year.  Some wealthy people would buy it just because they can, or as a status symbol.  I observed that many people were buying hybrids in Washington DC solely so they could use the HOV lane, putting a price of at least $5000 (based on the hybrid's price premium over similar non-hybrids) on HOV lane use.  In this example, I posited an annual pass, rather than a toll, solely because we have not toll roads here and no infrastructure at all to support tolls and a customer based unused to paying them.

Apparently, Lynn Kiesling, the DC/Northern Virginia area may soon experiment with exactly this concept, charging a congestion-variable price for HOV lane use while giving a discount to carpools.  Apparently the idea already is in use in SoCal.


  1. Max Lybbert:

    I remember when FasTrac(?) was introduced in Southern California. IIRC, there isn't a Dutch auction, just a set price to pay for the electronic device that permits you to ue the toll lanes. Then, if you're car is loaded enough, you can use the lanes for free. Otherwise you pay a toll that is calculated at different time of day to be higher than most people would want to pay, specifically to keep the lanes pretty clear of traffic.

    It appears to work. Unfortunately for me, I've never been in the targetted market (i.e., I'm not one of those people able to pay for a faster ride). Of course, the state continues to tell everybody, "by moving those guys into the other lanes, it makes your commute faster too."

    I support the idea, even if I don't get a faster commute. OTOH, in California, some people consider it a handout to the rich, even though the rich have to pay for it.

    Only in California can people get away with talking about an expensive handout to the rich.

  2. Doug:

    Also interesting is that the construction of the toll lanes is being paid for by a private company, in exchange for a portion of toll revenue. No tax dollars at work!

  3. Jonathan:

    If pricing works for one class of asset (HOV-lane access) why not apply it to others (the entire road)? A problem with using formal auctions to ration HOV-lane access is that people whose time is on average worth less than that of the successful bidders in the HOV-lane-access auction are still stuck waiting. Sure, they benefit to some degree as HOV-lane use increases, but there is still going to be congestion because most of the road isn't priced. Another problem with pricing schemes like yours is that they rely on long-term subscriptions that are inherently unable to handle varying marginal costs optimally. Obviously the marginal costs and benefits of road usage for different users vary by time and occasion. For example, there are times when people who would usually pay little for road access are willing to pay much more.

    Perhaps a better system would price by lane no matter who is driving. This could probably be arranged with transponders, and prices could be set automatically via algorithms based on traffic speed and cars per lane per unit of distance. Motorists would get current prices from electronic billboards and could adjust their behavior accordingly.

    In any event, my hunch is that the HOV model is not well suited to modern road-pricing schemes and might be better abandoned. Of course, getting transportation bureaucrats to do that is another issue.