Another HOT Post

Peter Samuels at TollRoadNews writes this about Randall Pozdena (ECONorthwest) take on our HOT Study (previously discussed at TollRoadNews). Average value of time saved irrelevant to toll express lanes – Randall Pozdena ECONorthwest :

“2013-08-30: It’s not the average value of time saved (VoTS) that’s relevant to users of toll express lanes running alongside free lanes. It’s the higher time saved values of a small proportion of trips that choose the express lanes that determines how much the minority using express lanes will pay – the VOTS of the top decile or two of the distribution of total trips in the corridor.

Randall Pozdena, managing director and senior economist at ECONorthwest in Portland OR makes this point in comment on our reporting of a University of Minnesota study of motorist behavior on the 394 and 35W toll express lanes in the Minneapolis area by Michael Janson and David Levinson. We’d reported the researchers’ surprise at the very high values of time saved they’d observed in the Minneapolis toll lanes  – that drivers in express lanes regularly pay $1 to $2 per minute saved, or $60 to $120/hour.

That compares to full tollroad average driver payments of $15 to $30/hour.

The main thrust of our report was on the Janson-levinson discovery that toll rates can have a definite proxy effect – high rates being seen as a proxy indication of high congestion shifting the demand curve to the right.

But the other newsworthy findings of the study seemed to be the very high VOTS measured and the Janson-Levinson explanation that motorists may have an exaggerated sense of the time they save. They are behaving with imperfect knowledge, and systematically biased perception of what time saving they’re buying.

Pozdena sees it quite differently.

He says people using toll express lanes are acting rationally and while their knowledge is imperfect he sees no systematic misperception.

‘In a toll express lane setting, implicit values of time are very likely to be that high ($1 to $2/minute saved.)  The reason is that the ‘conventional’ value of time is actually an average, but in the real world, there is a log-normal distribution around that average that reflects not only the distribution of income, but also the urgency of the trip at the instant.  Thus, the users who self-select to pay to join the toll express lane are drawn selectively from the UPPER TAIL of the VoT distribution, and would not be expected to display average values of time.’

He says ECONorthwest has developed a model for toll optimization model that is based on calculating the shape of the distribution of values of time.

‘We take the regional model average VoT and form a distribution around that mean in a key step in the data flow called ‘VoT Transform.’  

He adds that at ECONorthwest they ‘routinely find our model predicting that the MARGINAL value of time of those who are skimmed off to the HOT lane is several multiples of the AVERAGE value of time, and the average of those above this cutoff would be even higher.  Thus, I don’t think that one can conclude that HOT lane users think they are getting ‘greater time savings’ than they really are.  They are just the folks with long-tail values of time.’

Pozdena says the proxy effect is not a problem if the pricing system is working as it should and prices according to density of vehicles. It is conveying good information to motorists about conditions they can expect.”

Obviously there is a long-tail (one cannot have a value of time below zero, but one can have a value of time of $200/h). Further, people using the toll lanes must have a higher value of time than those who do not use the lanes, at that time. The question is the composition of rational and fully-informed travelers vs. misperception (for which, contra Pozdena, we do have evidence) vs. emotionality vs. concern about reliability vs. principal agent problems (someone else’s money) vs. any of the other factors that influence route choice and lane choice. These are all components in the choice of different individuals, and we don’t know enough to accurately ascribe the choice to each component.

I shriek the wail of every scientists: more research is needed.

One thought on “Another HOT Post”

  1. With in-vehicle technology like Inrix (and competing applications), it is now possible for a motorist to “see” congestion far ahead. Combine that with knowing what the price for use of the managed lanes (which is generally disclosed on signs in advance of entrances to those lanes) are, motorists can make an informed decision. With apologies to the former New Jersey-based clothing chain Syms, “an educated motorist is the best customer of managed lanes.”

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