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. Predatory Pricing

    The act of setting prices low in an attempt to eliminate the ...
  2. Competition-Driven Pricing

    A method of pricing in which the seller makes a decision based ...
  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 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. Insurance

    The True Cost Of Owning A Car

    Driving is often the most convenient way to get around, but it'll cost you.
  7. Options & Futures

    Analyzing Auto Stocks

    Find out what to consider before taking a ride with stocks from this industry.
  8. Economics

    What Is The Labor Market Conundrum?

    We are facing a conundrum with investment implications: Why are wages still stagnant, when jobs are being created at the fastest pace since the late 90's?
  9. Economics

    Understanding Impairment

    In finance and accounting, impairment refers to the loss of value of a company’s capital stock.
  10. Economics

    What is a Promissory Note?

    A written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center