POLICY ISSUES ASSOCIATED WITH ROAD CAPACITY OPTIMIZATION THROUGH SOCIAL MARGINAL COST CHARGING

Abstract

Economic theories demonstrate that when roads are congested, the social optimal traffic volume for addressing road capacity can be achieved through social marginal cost charging. Moreover, basedon the study by Mohring (1976), in the neutral economies of scale, optimization of roadcapacity can, theoretically, be achievedby appropriating the excess revenue derived from social marginal cost charging to additional investment in road capacity. To apply this approach to actual roadinvestment, however, we needto address the issues that impede the shift to optimal road capacity. In this study, we enhancedthe simulation analysis conductedin Misui andNemoto (2010, 2011), andevaluatedthe SMC charging through the examination of the relationship between the roadcapacity of the network andthe traffic environment roadusers faced. As a result, we pointedout three policy issues: (1) modification of SMC charges considering public acceptance, (2) feasibility of the optimal roadcapacity under cost-benefit criterion, and(3) long-term relationship between the urban structure andthe roadnetwork.