DIFFERENT - User Reaction and Efficient Differentiation of Charges and Tolls
Overview
Background & policy context:
In the European Union, levels and structures of transport infrastructure charges vary strongly across transport modes and countries. Some degree of convergence exists on the intention to apply the principle of marginal cost pricing in various transport sectors, but, in the presence of unsolved difficulties in funding transport investment and even serious concerns about marginal social cost pricing in several countries, any such convergence is slow. Furthermore, at present, the charging regimes that can be observed are often far from internalising external costs and are rarely based on efficiency principles. In this situation, differentiation of existing charges appears to be a sensible intermediate step.
The potential scope of price differentiation is broad and includes dimensions such as:
- time, for example in the case of congestion or noise nuisance;
- place, for example depending on congestion level or region;
- type of infrastructure, to represent differences in quality supplied;
- type of user and/or type of goods, to capture willingness to pay of clients;
- type of vehicle and axle loads to take for instance maintenance costs into account.
Objectives:
The main objectives of the DIFFERENT project were:
- to improve the understanding of user reactions to differentiated prices;
- to develop a scientifically sound approach to determine efficient differentiation of infrastructure cost based charging schemes and methods to assess their impact on user behaviour;
- to analyse and demonstrate the benefits and effectiveness of differentiated charging and taxation schemes as a means to manage mobility, externalities, equity aspects and to obtain revenues and recover infrastructure costs;
- to provide policy recommendations in general and, in particular, for the Common European Transport Policy.
Methodology:
A key issue in putting differentiated charges into practice was the need to understand user reactions to differentiated prices, and this will be investigated in DIFFERENT through empirical as well as interrelated theoretical work. The main emphasis of the DIFFERENT project was on the empirical work, based on real-world case studies. Hence a range of cases where price differentiation was actually applied could be studied. Use was made of Stated and Revealed Preference research. In addition, models were used to analyse the effects of price differentiation, in particular with regard to long-term consequences.
The theoretical side in DIFFERENT were based three main pillars:
- normative economic theory - information whether, given real-world frictions (in particular the costs of differentiation on the side of infrastructure operators, their clients and end users), which type of differentiated charging structures should be implemented to maximize welfare;
- positive economic theory - investigated given political circumstances, selfish motives of decision makers and the influence of interest groups, which differentiated pricing structures were the most likely to be implemented;
- behavioural theory - took account of cognitive factors, which might lead travellers, and in some cases also freight operators, to make sub-optimal decisions, either because of their inability to process complex pricing information or because of 'irrational' pattern of behaviour;
- as a final step the results of the research were interpreted in view of the relevance for the European Transport Policy and European Pricing Reform.
The DIFFERENT work plan was broken down into five types of work packages:
- the very core of the project were the five work packages (WP 5 to 9), each focused on one of the principal markets of transport infrastructure users. These five work packages investigated the effects of differentiated charges on airlines, shipping operators, railway operators, road freight operators, car drivers;
- across these cuts one work package (WP 10) dealt with issues of intermodality and modal change that might be impacted through differentiated charging schemes;
- WP 5 to 10 were accompanied by the two main building blocks of scientific theory in the project, namely WP 3 on economics and WP 4 dealing with behavioural issues.
All of the above were preceded by:
- WP 2, set
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