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Winners, Losers, or a Zero-Sum Game? The Distributional Impacts of Pricing Schemes Peter Nelson, Resources for the Future Farideh Ramjerdi, Norwegian Institute of Transport Economics Douglass Lee, Volpe National Transportation Systems Center WELFARE AND DISTRIBUTIONAL EFFECTS OF Two scenarios were modeled: a HOT lane policy and ALTERNATIVE ROAD PRICING POLICIES FOR a more comprehensive road pricing policy. Under the METROPOLITAN WASHINGTON, D.C. HOT lane policy, all of the region's high-occupancy vehicle (HOV) lanes were converted to HOT lanes that Peter Nelson solo drivers could use for a 25-cent-per-mile toll. The comprehensive road pricing policy tolled all of the area's Like many metropolitan areas in the United States, the roadways at 7 cents per mile on general lanes and 22 Washington, D.C., region has recently experienced cents per mile on premium lanes. rapidly worsening traffic congestion as well as difficul- The HOT lane policy produced substantial net ties in finding revenue to finance improvements to the benefits--more than $170 million per year. Travelers transportation network. As a consequence, local policy gained $105 million in benefits, even after netting out makers have directed their attention to high-occupancy their toll payments, through improved travel times. toll (HOT) lanes as a cost-effective way to provide addi- Gains were both direct (for those who used the HOT tional capacity. Currently the governments of both lanes) and indirect (for those who benefited from the Maryland and Virginia are examining the viability of spillover effects of opening up spare road capacity). All implementing HOT lanes on a variety of local facilities. income groups experienced positive welfare changes. Concerns about so-called Lexus lanes have arisen in The only identifiable losers were previous users of the the Washington area in the past. In 2001, Maryland HOV lanes, who now experienced somewhat longer Governor Parris Glendening killed a HOT lane project travel times, and travelers along "non-HOT" corridors. because of concerns that it would be unfair to lower- and These travelers experienced losses because the policy middle-income drivers. To test this assertion, we at increased vehicle trips and therefore produced slightly Resources for the Future modeled two scenarios by using more congestion in the core. Losses were trivial for the Washington START model, which is based on the both of these groups. In addition, the policy raised $65 START modeling suite developed MVA Consultancy. million annually. START is a "strategic" model and is characterized by One implication of the research is that compensation an aggregated treatment of the transportation network of travelers is a much less important issue in a HOT lane and a highly detailed characterization of transportation context than it is for more global road pricing schemes. demand. Its flexibility, quick run times, and consistency In addition, because HOT lanes do not appear to inflict with household optimization theory make it useful for large welfare losses on any identifiable group of travel- policy research. One of its attractions is that it can account ers (including low-income travelers), HOT lanes appear for policies' "adjustment costs" (e.g., the cost of switching to be a promising avenue for promoting acceptance of from on-peak to off-peak travel to avoid paying a toll). road pricing. 48