Empirical Evidence of Toll Road Traffic Diversion and Implications for Highway Infrastructure Privatization

Abstract

Little scholarly empirical work measures truckers’ elasticity of demand for limited access toll roads. How do truckers respond to pricing signals? As price increases, how extensively do truckers divert from limited-access highways to secondary roads? At what price does this diversion impose costs on secondary highways? Using a unique data set, this article demonstrates empirically the extent to which pricing leads to diversion. Diversion is substantial, and elasticity becomes increasingly negative with higher tolls. This has significant policy implications. The diversion of large trucks probably creates an externality that, if it were priced, might cause the benefits of tolling to outweigh the costs. This diversion may have a safety cost because secondary roads are inherently less safe than limited-access divided highways. In addition, second-best truck routings may introduce costly deadweight losses to the economy, damaging interstate commerce. Profit-maximizing toll road operators might exacerbate this diversion to the detriment of public welfare.