Applied Study of Price Discrimination Implemented on a Two-Path Route Expressway

Introduction In Japan, the Japan Highway Public Corporation (JH) is in charge of construction, operation, and manage- ment of both certain toll roads and the inter-city ex- pressway system throughout the country. The certain toll roads and inter-city expr…

Applied Study of Price Discrimination Implemented on a Two-Path Route Expressway

This study aims at implementing price discrimination to get maximum revenue on a two-path route expressway, focusing on the problems which occur in traffic forecasting when applying a “profit-maximizing” toll designed to maximize revenue for a certain toll road in Japan. A break-even discussion is inevitable in the process of planning a certain toll road. According to the theory of transportation economics, market segmentation price discrimination is supposed to be efficient in the transportation market to increase the revenue of fixed facilities. In the model, a bypass and an adjacent expressway form a two-path route section. Two different toll levels are implemented for the bypass: one is for through traffic, and the other is for inside-inside and inside-outside traffics. This two-path route plus two-toll-level system thus causes difficulty in traffic assignment that is based on the minimum route searching method. In the study, a rational approach of adjusting the through traffic is implemented to predict the traffic flow as well as revenue on two parallel routes with different toll levels. The approximate calculation method that fixes the split rate of the passing through traffic flow is applied to solve the two-path route plus two-toll-level problem since passing through traffic is price elastic. Market segmentation pricing, which gives two toll levels in a toll road, is proved to be practical for increasing revenue. The results are also verified to be rational by using the survey data of Meishin Expressway.