Second-Best Congestion Pricing in Urban Space: Cordon Pricing and Its Alternatives

Abstract

This paper examines the effects of alternative congestion pricing systems, cordon pricing and congestion pricing for existing toll roads, using the network equilibrium model developed for the Osaka Metropolitan Area, Japan. Cordon pricing is more effective in reducing the total efficiency loss from traffic congestion, but produces relatively large amounts of toll revenue. On the other hand, pricing for existing toll roads keeps the loss in consumer surplus (and toll revenue) relatively low to attain the same level of efficiency gain as the cordon pricing.