1. Orf 467 – Transportation Systems Analysis Fall 2007/8 11/28/2007Week 10 PROBLEM: how do you price lane capacity? Charge for it! How much? How? Value Pricing

2. Orf 467 – Transportation Systems Analysis Fall 2007/8 11/28/2007Week 10 Differential pricing occurs in sectors Airline ticket prices: –function of remaining seats to be sold Electricity: –time of day (afternoon peak higher than overnight) Restaurants –Early bird specials for seniors Why not for mass transit and highways??? Transit: –time of day (cheaper during rush hours!!???)

3. Orf 467 – Transportation Systems Analysis Fall 2007/8 11/28/2007Week 10 Objective of Value Pricing Influence the “user optimal” objective function to yield a system optimal solution. From a system optimal perspective (minimize overall “congestion”: minimize sum of “delay”) –lots of unused capacity in other locations at congested times and all locations at uncongested times –so.. motivate the shift of some fixed-location demand to uncongested times motivate the shift to uncongested locations at congested times Motivation: Price

4. Orf 467 – Transportation Systems Analysis Fall 2007/8 11/28/2007Week 10 Example: Rt1 in the Princeton-Trenton Corridor

5. Orf 467 – Transportation Systems Analysis Fall 2007/8 11/28/2007Week 10

6. Orf 467 – Transportation Systems Analysis Fall 2007/8 11/28/2007Week 10 Issues with value pricing How do you charge? Where does the money go? Other approaches?? –What about creating a market for roadway capacity? Ration capacity equitably Create a “black market” for the ration cupons.