Modeling Saliency in Transportation Pricing: Optimal Mixture of Automobile Management Policies

TitleModeling Saliency in Transportation Pricing: Optimal Mixture of Automobile Management Policies
Publication TypeConference Paper
Year of Publication2015
AuthorsAlyona Michel, Jinhua Zhao
Conference NameTransportation Research Board 94th Annual Meeting
PublisherTransportation Research Board
Conference LocationWashington, D.C.
KeywordsBehavior; Costs; Economics; Policy making; Revenues; Taxation

We introduce the advantage of behavioral economics into the transportation policy evaluation criteria that traditional economic approaches do not consider. To that end, we present a framework for using tax salience as a connection between the dimensions of government policy objectives (revenue, behavior change, and public acceptance) with tax instruments (car ownership charge, fuel tax, congestion tax, parking fee) meant to influence behavior. Salience is the psychological effect of paying more/less attention to something relative to its context. This paper concerns price saliency with respect to transportation, which we define as when actual cost differs from perceived cost depending on aspects of price and payment. A review of relevant literature on policy-making frameworks and tax salience reveals the connection between operational and externality costs, perceived costs to the user, and actual government-collected revenue. Salience is proposed as a modifier for adjusting how much is paid by users of the transportation system (revenue), and how much users perceive paying (internalized externality cost), whereby users can internalize the cost of the negative externalities generated by car-related behaviors, and government can attain its objectives. We reveal the ambiguity of the equity principle: should a policy be equitable with respect to its actual tax, perceived tax, or effect on behavior? We discuss incorporating into the framework technology, privacy, policy synergies, and proxy instruments. Lastly, the complexities of salience’s relationship with acceptance and technology make it unclear whether decreasing salience is always desirable.