Tolls Go Cashless

Is this the end for people fumbling for dropped change on the floor of the car?

Reports the WSJ:

This weekend may mark the beginning of the end for toll-booth operators and plastic coin baskets, two institutions long associated with holiday traffic and highway congestion.

On Saturday, an authority that runs the E-470 toll road near Denver is ditching its coin handlers and going entirely cashless.

One curious thing about electronic tolls; they’re more expensive.

It is unclear whether cashless toll roads will have higher toll rates than ones offering a pay-with-cash option, but some theorists say higher rates are likely. Amy Finkelstein, an economics professor at the Massachusetts Institute of Technology, has analyzed 50 years of data for 123 toll roads. In a paper to be published in the August edition of the Quarterly Journal of Economics, Prof. Finkelstein suggests electronic tolling results in rates that are 20% to 40% higher than they otherwise would be.

One reason, she speculates, is that “when tolls become less visible, it’s easier to raise the tolls.” (but is it also that electronic tolls tend to be built on new, more expensive facilities, or ones more prone to congestion?)

Do economists have a word for this phenomenon? Something about transparency? Price elasticity? But it seems a strange anti-thesis to the anchoring effect, with no frames or anchors at all.

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This entry was posted on Friday, July 3rd, 2009 at 6:27 am and is filed under Cars, Commuting, Congestion, Etc.. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

7 Responses to “Tolls Go Cashless”

  1. Michael Says:

    Chicago some years ago doubled the cash price but kept the same toll for people who got the transponders. They continue to let you pay cash. On a trip through Ontario, though, a few years back, they have no option to pay cash and people without the local toll transponder are billed by mail via license plate lookup, with fees for that ‘service’ greater than the actual toll itself.

  2. Rob Says:

    Take a look at the 407 Toll road in Toronto.

    Entirely electronic, and I am pretty sure that it has to be one of the most expensive toll roads in north america.

    Standard rate is $0.1985 CAD cents per km.

    So $0.2786 USD per mile + a minimum $0.25 trip fee

    IF you have a transponder. Which is $21.55 per year.

    Without a transponder you will be billed

    $0.2789 USD per mile
    $2.85 “video toll charge”
    $0.25 minimum trip fee.
    $2.50 monthly account fee.

    It is a profit making machine…. The worst part?

    The Ontario provincial government which SOLD this highway to a private company and gave them a 99 year lease on the property for a flat fee.

    It currently generates revenue of about 480-500 million per year.

  3. aaron Says:

    A requirement to prominently display the rate before approaching the entry to the toll route should be more than enough.

    My guess is they cost more simply because they are faster. With manual tolls, a cost is generally incurred that is in par or even excess of the actual toll while waiting in queue.

  4. Ty Says:

    More about Highway 407 here (ps it’s not in Toronto, it doesn’t even go through the city, it’s north).

  5. Peter Says:

    higher tolls on cashless facilities could simoply be an example of the effect of transaction costs (the lower the “cost” of the transaction to the user the more they will be preapred to pay for the product).

  6. David Levinson Says:

    The word is “salience” according to Amy Finkelstein’s paper. Tolls you do not see are not salient (from the etymology, salient is derived from a root “sel” meaning leap out at you) in making your decision. WSJ is quite behind NYT on this story though. See for reference to an article from 2007 citing Amy’s research.

  7. k Says:

    As previously mentioned, open road tolls in Illinois are half the cost of cash tolls.

    Fortunately, people are finally beginning to get the “cactus” signs displayed in advance of the toll plazas. These signs look like a saguaro cactus with one bent arm – the straight arm is for transponder tolls, and the bent arm directs drivers to the cash lanes.

    Tolls on E-470 in Denver have always been high (OK, not as high as in Japan).

    When I lived in Thornton CO (northern suburb) and worked in Centennial CO (south of the DTC, near Park Meadows Mall), the one way cash toll between I-25 and 120th Ave was at lesst $10, if not more. The high tolls back then (late 90′s-early 2000′s) encouraged light use and allowed higher speed. I suspect increased tolls are likely due to low volume and installation of the open road tolling equipment.

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