Introduction • The major problem facing the transportation is congestion. • Congestion occurs because many people prefer to travel at the same time and the transportation capacity is fixed.
Transportation Market • Demand: • Increased economic growth added to growth of automation. • More people prefer to use the same road facilities at the same time.
Short-Run Supply Consideration • Roads: • Capacity exceeded during peak rush hours of the day. • We charge zero nominal prices for road usage ,so instead of prices allocating road space, time become the allocater. • The problem of using transport capacity most effeintly is one in which a third party (government).
Why a Third Party Needed? • Because once a road near capacity , the average speed per car declines as more car enter the road. • Thus additional cars cause negative externalities. • Negative externalities cause a divergence to occur between the private marginal cost (MCp) of anther car entering the crowded road and that car’s social cost (MCs).
Efficient Pricing of Existing Road Space • Each driver , will enter the road until the P=MCp. • Price represents the value of anther car entering the road. • MCp represents the cost of the next –best alternative route. • The optimal number of cars is where: price=MCs
MCs Cost P2 P1 Q0 Q2 Q1 Number of cars • Once Q0 cars are on the road , additional cars slow others down, thus MCs> MCp. • The point where society attains the optimal number of cars is where P=MCs, or Amount Q2. • But “rational” consumer will enter the road until Q1. • If society is to attain the optimal use of road during peak hours, a charge similar to P1P2, will have to be levied against users. • This charge or toll would be exactly equal to the difference between the Mcs and MCp of the Q2th car. MCp D
Other Methods • Higher Parking rate during peak hours. • Changing working hours. • Car polling
Long Run Supply Consideration • The goal is to provide a level of capacity for all modes which maximize the satisfaction of society • This is very difficult goal to meet: • 1- it is difficult to forecast the preference of society • 2- Most transport planning is done by the public sector.
A Benefit – Cost Approach to Transport Planning • B/C involves forecasting the benefit and cost over the expected life of the transport project. • Discounting benefit and cost to their present value. • Choose the project that maximize net benefit to society. • The difficulty is in listing all the expected benefit and to put a Riyal value on these benefits.
Benefit Measure • We have to know what traffic patterns and volumes will be in the future. • Benefits may be categorized as direct and indirect. • Direct benefits include the time and operating cost saving to users of the expressway. • Indirect benefits (for non users) less congestion, income distribution ( increase in price of land).
Cost Measure • Direct and indirect cost • Direct cost : fixed and operating cost. • Indirect cost: congestion occur at ramps to expressway, increased pollution.
Alternative Solution to Congestion • User charge • Express bus lane • Free transit