Fascinating idea. Express tollway lanes that drivers may elect to use—at variable cost—to escape congestion. bq. The price would change with the degree of congestion, so that a premium is charged when the rest of the roadway is especially crowded but the toll drops as the highway empties. On State Road 91 in Southern California, one of the earliest examples of this relatively new trend, express lane tolls range from $1 to $6.25, depending on the traffic in the adjoining free lanes. (“Washington Post”:http://www.washingtonpost.com/wp-dyn/articles/A64154-2004May3.html) The market is a form of auction: the fewer drivers demanding the use of the toll-lanes the lower the price. As the toll-lane demand rises, so does the price until supply (of rapid transit) and demand (to escape the traffic jam) equilibrates. But is the market efficient? Drivers (the buyers) are at a great disadvantage compared to the highway authorities (the sellers) when it comes to information about the state of traffic and the average expected time to some arbitrary point ahead. How do drivers decide on whether to accept the offer (price) or to wait in the hope that (if there are few takers) the price will fall? Or do they buy on impulse, as a measure of frustration? Is this an efficient means of defining a market for ‘de-congestion’? Perhaps the law requires the highway authority to provide this information (e.g. on roadside signs)? If not, there could be an advertising bonanza for local radio in this: or for cell/mobile phone value-added services. In the absence of such information services, you could imagine a bunch of secondary markets emerging. Drivers signalling to each other (finger signs?) from lane to lane in an attempt to establish local collusion on price (a monopsony). Would this work? Given the temporary nature of the buyers cartel, it would be awfully hard to punish defection. Or would it? A pen knife scrape across the paintwork? A little nudge on the bumper-bar? In a more positive vein, think of the derivative possibilities. Could drivers buy “congestion futures” for parts or all of a tollway? What if the authorities decided to set up a market for e.g. Monday-morning or Friday-afternoon express lane futures? Presumably they could contribute considerably to smoothing out congestion periods. Thanks to “Ben Muse”:http://www.acsalaska.net/~benmuse/blog/2004_05_01_archive.html#108365237526864554) for the pointer.
Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.
He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher