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Why People Don’t Like Congestion Pricing

2012 December 12
by Eric Horowitz

Across the political spectrum there are growing pockets of support for congestion pricing. The benefits of creating more toll roads include raising much needed revenue, decreasing carbon emissions, and shortening commute times. In the long-run these outcomes will lead to better public transportation and create a positive feedback loop of higher revenues, lower emissions, and faster commutes. Yet for most Americans, even those who can easily afford tolls, spending money on roads that are currently free is like paying to use a bathroom. It’s for European socialists and characters in science fiction movies, not for us.

One reason for our aversion to new tolls is that it’s psychologically difficult to make the money-for-time trade that’s at the heart of congestion pricing. Loss aversion — the tendency to prefer avoiding losses instead of acquiring gains — makes people opposed to giving up the freedom to drive for free. In addition, the availability bias, which leads people to overemphasize easily recalled information, makes it easier to envision the monetary cost of paying a toll than the opaque cost of losing time while sitting in traffic. The concept of time also has unique features that create problems when a person attempts to calculate the potential costs and benefits of a toll. For example, unlike money, time cannot be replaced or stored. Time is also not fungible — you can’t trade an hour for two oranges and then later trade two oranges for an hour.

New research from a group of Taiwanese researchers helps illustrate how the unique characteristics of time can lead people to overemphasize money rather than time when making travel decisions. Although the study did not specifically deal with congestion pricing, the experiments did examine transportation preferences that involved tradeoffs between time and money. There were variations among the different experiments, but the general design asked participants who had each rated an hour to be worth about $33 to reveal their intentions to save money or time when it came to buying a bus ticket. The researchers found that people overvalued money:

The results from Experiment 1 suggest that people prefer saving money over saving time, indicating their attaching more value to saving money, but this difference disappears after they are reminded of the importance of the value of time, which is showed in Experiment 2. Moreover, people discount the future value of saving time more greatly than that for saving money, as predicted, which confirms the conjecture that people’s tendency to underestimate the value of time may be even more pronounced in the future than in the present due to their overestimation of future time slack.

The study is good candidate for replication because it has a number of important limitations, but the last result still reveals a lot about lukewarm reactions to congestion pricing. The researchers essentially found that the farther into the future a trip is going to take place, the more likely people are to prefer a price discount over an equivalent shortening of the journey. In other words, if a week before your journey you’re indifferent about buying a ticket that’s $10 cheaper or a ticket that will get you there an hour faster, six months before the journey you’ll be more likely to choose the cheaper ticker over the faster ticket.

This is a problem because congestion pricing is a policy that people think about over the long haul. Even if a person believes that the time they save on a toll road is worth the money tomorrow, because time loses its future value faster than money, when they think about their commute next year they may believe it’s not worth the money. That means in order for someone to support congestion pricing they must value the time saved so much more than the money spent that they will still prefer having the extra time when they think about the tradeoff years into the future.

One takeaway from the study is that the most effective way to garner support for congestion pricing is with a system of toll lanes rather than toll roads. Having part of the road remain free makes the option of choosing between time and money more salient (as opposed to full toll road, where choosing the money may not seem like a real choice because it means going a different route). When people imagine that they’ll always have this choice, they’ll think about congestion pricing on shorter time frame; there’s no need to worry about paying money next year because if you don’t want to you can just take the free lanes. Preventing these long term views of congestion pricing helps mitigate some of the effect of steep time discounting, and at the margin that should increase support for congestion pricing.
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Chang, C., Chang, S., Chang, J., & Chien, Y. (2013). Which Is the Better Option? Quicker or Cheaper? Psychology & Marketing, 30 (1), 90-101 DOI: 10.1002/mar.20589

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