Measuring Long-Run Price Elasticities in Urban Travel Demand

Donna, Javier D. (2018): Measuring Long-Run Price Elasticities in Urban Travel Demand.

Abstract

This paper develops a structural model of urban travel to estimate long-run price elasticities. A dynamic discrete choice demand model with switching costs is estimated, using a panel dataset with public market-level data on automobile and public transit use for Chicago. The estimated model shows that long-run own- (automobile) and cross- (transit) price elasticities are more elastic than short-run elasticities, and that elasticity estimates from static and myopic models are downward biased. The estimated model is used to evaluate the response to a gasoline tax. Static and myopic models mismeasure long-run substitution patterns, and could lead to incorrect policy decisions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Long-run price elasticities, Dynamic demand travel, Hysteresis
• Subjects: L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L71 - Mining, Extraction, and Refining: Hydrocarbon Fuels; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L91 - Transportation: General; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L98 - Government Policy

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