Demand Elasticity under Time-Varying Prices: Case Study of Day-of-Week Varying Tolls on Golden Gate Bridge

One of the key issues in ascertaining the efficacy of various pricing schemes for managing highway traffic levels is the sensitivity of highway users to prices. The development of automatic toll collection technology (automatic vehicle identification or electronic toll and traffic management) has now made congestion pricing schemes technically feasible. The literature is relatively quiet on the specific question of the elasticity of demand with respect to changes in highway tolls, especially when tolls are time varying. Data from the Golden Gate Bridge from 1979 to 1984 are used to examine travel demand under time-varying prices. If traffic is price sensitive (elastic), then it might be possible to realize some of the potential for road pricing that has been identified in the literature. A brief overview of the literature on road pricing is provided, followed by a description of the data, model development, empirical results, and conclusions. The results include the finding that day-of-week cross elasticities are complementary; that is, increases in tolls on 1 day of the week tend to dampen traffic on other days of the week. This finding lends empirical support to claims that time-varying prices may be a viable strategy for managing traffic demand.