Bottleneck congestion pricing and modal split: Redistribution of toll revenue

The paper examines the question of the redistribution of toll revenue as seen in a bottleneck congestion model. Our objective is to analyse the impact of this redistribution on total cost and on modal split between railroad and road. Following Tabuchi’s two-mode model (1993), we integrate a redistribution of toll revenue towards public transport into our study. In this context, we investigate two kinds of road toll regimes: a fine toll and a uniform toll. We will consider two types of railroad fare: when it is set equal to the marginal cost and when it is set equal to average cost. These models allow us to show that toll policy to be more efficient as long as toll revenue is directed towards public transport when the railroad fare is equal to average cost. This paper is an extension of Tabuchi (1993) by taking the redistribution of toll revenue into account. It is assumed that toll revenue from road is redistributed towards public transport. The objective is to analyse the impact of this redistribution model on total cost and on modal split between railroad and road. It is shown that a toll policy is more efficient as long as toll revenue is directed towards public transport when the railroad fare is equal to average cost.