Prescription: Price Tolls Dynamically
Status: Occurring
I wondered why governments don’t use dynamic pricing. Airlines, hotels, and oil companies price based on peaks and troughs in supply and demand. Why not tolls? In a terrible economy, municipalities need to maximize revenues. What better way to do this than to put tolls on sale when demand peaks? This can also reduce bottlenecks and allow for safer cleanup of accidents by redirecting traffic using incentives.
TIME FOR DYNAMIC PRICING FOR TOLLS AND OTHER BUSINESSES, Oct 2009
What Happened
While excited lots of governments and businesses are taking this prescription, today, we’d tweak this recommendation a bit. While dynamic pricing optimizes for the seller, it can seriously piss off the buyer. Buyers hate uncertainty more than high prices. As explained in “How Price Anxiety Kills Sales“, we’d recommend a tiered dynamic system. It won’t be as optimal, but people can budget better. The transparency will keep a lot of politicians from getting voted out by angry drivers.
My congestion pricing conversion: Mayor de Blasio explains why he’s onboard a plan to combat traffic and raise money for the subways, Mar 2019
Singapore’s solution to rush hour: free off-peak subway rides, Jul 2014
The new $40 I-66 tolls offer great insight into commuter psychology, Dec 2017
Dynamic Tolls Reduce Congestion, Dec 2017
Uber to endorse congestion pricing for subway funds in TV ad, Dec 2017
A Novel Approach Comes to Restaurant Pricing, Jan 2018
One of London’s leading restaurants will today start pioneering a new pricing model based on the travel industry, with different charges depending on the day of the week and time of your booking.
HOW MUCH DOES IT COST TO UNCLOG NYC’S STREETS?, Mar 2018
“he group proposes what’s called a cordon charge. It’s a flat $11.52 fee on personal vehicles and a $25.34 fee on trucks entering the busiest section of Manhattan (below 60th Street) from 6 am to 8 pm on weekdays. And they propose those charges be complemented by a $2 to $5 flat fee on taxi and ride-hail trips during those crowded hours, for an extra $355 million in revenue. They estimate that it would cut congestion by 13 percent and generate over $1 billion annually, to be pumped back into the city’s transit system, making the most virtuous of circles.”
An End to Traffic Jams? It Might Not Be a Dream, Apr 2018
To keep traffic moving smoothly, raise the price of using particular roads when traffic is over their capacity. If the pricing is right, drivers will start making a host of changes: Some will switch to public transit; some will start carpooling; and others will find alternative routes or drive outside of rush hour.
new technologies make it possible to dramatically reduce those obstacles. Congestion pricing may soon use drivers’ mobile GPS and data communications to charge them tolls for trips down heavily congested roads. Gone is the need for any kind of physical tollbooth. Cars wouldn’t have to stop or even slow down, and the cost of implementing the system would be a fraction of what it would have been in the past.
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