Congestion Pricing

AAA

DEFINITION of 'Congestion Pricing'

A method used to reduce traffic by charging a fee to road users during rush hours. The user fee may vary by the time of day and day of the week, being highest during periods of peak demand and lower at less-popular hours. During low-demand times, there may be no fee at all. Economically speaking, congestion is considered a demand-side solution to traffic. An example of a supply-side solution would be increasing road capacity.

INVESTOPEDIA EXPLAINS 'Congestion Pricing'

Congestion pricing is not limited to transportation; it can be used with any service that faces varying levels of demand by time of day, such as electricity. Congestion pricing is supposed to encourage users who can be flexible in their usage times to shift their use away from peak periods to times when use is less expensive. One criticism of congestion pricing is that it acts like a regressive tax, harming low-income users more than other groups.



RELATED TERMS
  1. Competition-Driven Pricing

    A method of pricing in which the seller makes a decision based ...
  2. Predatory Pricing

    The act of setting prices low in an attempt to eliminate the ...
  3. Geographical Pricing

    Adjusting an item's sale price based on the buyer's location. ...
  4. Foot Traffic

    The presence and movement of people walking around in a particular ...
  5. Value-Based Pricing

    The setting of a product or service's price, based on the benefits ...
  6. Hedonic Pricing

    A model identifying price factors according to the premise that ...
RELATED FAQS
  1. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  2. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  3. How does neoclassical economics relate to neoliberalism?

    While it may be likely that many neoliberal thinkers endorse the use of (or even emphasize) neoclassical economics, the two ... Read Full Answer >>
  4. What are common concepts and techniques of managerial accounting?

    The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and ... Read Full Answer >>
  5. How is abatement cost accounted for on financial statements?

    Abatement costs are accounted for on a company's financial statements through increases in either cost of goods sold or operational ... Read Full Answer >>
  6. According to the neoclassical growth theory, what factors influence the growth of ...

    The neoclassical growth theory builds five major variables into its time-sensitive production formula. The first is total ... Read Full Answer >>
Related Articles
  1. Budgeting

    12 Car Insurance Cost-Cutters

    If car costs are dragging you down, find out how to free yourself from some of the extra weight.
  2. Personal Finance

    Save On Planes, Trains And Automobiles

    Getting to, and around, your travel destination doesn't need to break the bank.
  3. Options & Futures

    Beginner's Guide To Auto Insurance

    Find the perfect policy that suits both your coverage and budgetary needs.
  4. Economics

    What Determines Gas Prices?

    Gas prices are influenced by more than supply and demand. Find out what determines the price you pay at the pump.
  5. Options & Futures

    Top Tips For Cheaper, Better Car Insurance

    Accident, theft, vandalism - make sure your coverage will protect you when you need it most.
  6. Options & Futures

    Analyzing Auto Stocks

    Find out what to consider before taking a ride with stocks from this industry.
  7. Insurance

    The True Cost Of Owning A Car

    Driving is often the most convenient way to get around, but it'll cost you.
  8. Economics

    Calculating Income Elasticity of Demand

    Income elasticity of demand is a measure of how consumer demand changes when income changes.
  9. Economics

    Understanding Implicit Costs

    An implicit cost is any cost associated with not taking a certain action.
  10. Economics

    Understanding Diseconomies of Scale

    Diseconomies of scale is the point where a business no longer experiences decreasing costs per unit of output.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!