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 FAQS
  1. What is price variance in cost accounting?

    Price variance in cost accounting is the difference between the actual price paid by a company to purchase an item and its ... Read Full Answer >>
  2. What do you need to know to create a business model?

    A business model lays out the idea for a business, along with the step-by-step plan for making the business profitable. To ... Read Full Answer >>
  3. Do any markets not exhibit asymmetric information?

    Asymmetric information, when interpreted literally, means that two parties to an economic transaction have different information ... Read Full Answer >>
  4. What are the benefits of using ceteris paribus assumptions in economics?

    Most, though not all, economists rely on ceteris paribus conditions to build and test economic models. The reason they do ... Read Full Answer >>
  5. What is the difference between marginal benefit and marginal revenue?

    Marginal benefit measures the consumer's benefit of consuming an additional unit of a good or service, while marginal revenue ... Read Full Answer >>
  6. What is the difference between marginal benefit and marginal cost?

    Marginal benefit is the incremental increase in a benefit to a consumer caused by the consumption of an additional unit of ... 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

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  9. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.
  10. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.

You May Also Like

Hot Definitions
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  4. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  5. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  6. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
Trading Center