Is Congestion in Toll Roads an Externality?
There is also issue of service level expected by drivers who subscribe to Toll Roads on a regular basis. In such cases, each additional marginal increase in traffic violates the implict or explict expectations that subscribers might have regarding traffic level, speed and accident risk. If certain drivers do care about congestion, accident risk level etc. then they could subscribe to the Toll Road use with combination of either fixed service level guarantees and fixed fees or variable fees depending upon the actual service level provided. In later case, Toll Road owners will have to balance the increased income from marginal traffic and loss of revenue from the subscription because of degration of service level. Will such an arrangement internalize the externalities involved?