For years, everyone entering Tel-Aviv from the east (e.g. from Jerusalem or from the airport) during the morning rush hour got stuck in the usual traffic jam for about an hour or so. Every day. An hour or so. About a week ago a new toll “fast-lane” has been opened, bypassing the traffic jam. Part of the intention is to reduce traffic into Tel-Aviv: public transportation as well as carpools use the lane for free and a huge parking lot has been set up at the entrance with free public transportation to Tel-Aviv provided. (There are also various criticisms of this lane, such as the fact that a lane that was once “free for all” is now “for the rich”.)
What is most interesting and novel, certainly for this blog, is the pricing mechanism: The price is set dynamically and may vary from 6 NIS to 75 NIS according to traffic (that’s from less than $2 to over $20) — and is displayed prominently at the entrance to the toll way. Automatic systems monitor the number of vehicles on the lane and their speed and adjust the price as to ensure a driving speed of 70 km/h. It seems that the designers take it for granted that an equilibrium will be reached: as prices go up, less drivers will elect to use the fast lane, reducing congestion and increasing the speed, and when it rises above 70 km/h, prices will decrease again, presumably boosting demand, etc. This makes sense, but a skeptical engineer may question each of these logical steps. Will drivers even be sensitive to the prices? Maybe they will interpret a high price as a signal that traffic outside of the lane is really awful, encouraging more drivers to take the fast lane? I would tend to view the consistent emergence of an equilibrium as a non-trivial validation of economic theory. Let’s wait and see. The last that I’ve checked, there weren’t enough people using the fast lane even at the lowest price. I certainly enjoyed that when I traveled to Tel-Aviv yesterday, reaching my destination almost an hour earlier than I’m used too.