regarding the acceptability of road pricing

Jens Schade Imprint-Net EG 6-3Brussels 04 Dec 2007

Resistance to road pricing reforms Implications to improve acceptability

Jens SchadeDresden University of Technology

[email protected]

mailto:[email protected]


Outline

1. Why Acceptability Is Important? 2. General Reasons: Heuristics & Biases3. Specific Road Related Acceptability

Issues4. Some Recommendations


1. Why “Acceptability” Is Important?

• Democratic society (e.g. referendum)• User perspective• Strong public resistance may lead to fear of

political parties about negative consequences for their next elections

• Resistance might be exhibited in the form of demonstrations, boycotts or even sabotage.

The more people accept road pricing the more effective the measure will be.


Recent example of resistance• A 2007 online petition against road pricing, started by Peter Roberts

attracted over 1.8 million signatures1.8 million signatures, equivalent to 6% of the entire UK driving population. Over 150,000 signatures were added during the last day before the petition closed on February 20, 2007. Some commentators were puzzled by such strident opposition given the lack of clear proposals in this area by Government.


2. Some general reasons why people object pricing reforms: heuristics and biases

• Cognitive psychology and behavioural economics have shown that people deviate from ideal precepts of rationality in many settings, showing inconsistent judgement in the face of framing and other formal manipulations of the presentation of problems

• People are vulnerable to a wide range of heuristics and biases, leading to inconsistent inconsistent judgement and evaluationjudgement and evaluation.


Why people normally object ‘reforms”

• Because… people like things to stay relatively the same, i.e. they favour the status quo.

• This is called a „status quo-bias“• Why? People do not value objects in absolute

terms. They value it relative to a (neutral) reference point. This is (normally) the status quo (can be also expectations, experiences etc.).


A simple example …• You did an exam (in microeconomics or in psychology in microeconomics or in psychology ……)

A B C E F

excellent worst

Grades

You feel good and you expect to get

lossgain


A second important issue …

• Losses are experienced more intensely than gains of similar objective magnitude

• i.e. you are more disappointed about the C grade than happier about the A grade (compared to the expected B grade)

• this leads to the following value function …


subjective

objectivevalue

1

2

-1

-2

-2 21-1

Kahneman, D., Tversky, A. (1979). Prospect theory: Analysis of decision under risk. Econometrica 47: 263-291.


Three characteristics of the function

1. The value function is defined on deviations from a reference point (normally the status quo) and

2. is normally concave for gains (implying risk aversion), commonly convex for losses (risk seeking) and

3. is generally steeper for losses than for gains (loss aversion).

I.e. in the context of gains people tend to risk-avers decisions, and in the context of losses they tend to risk-seeking decisions


Loss Aversion• loss aversion refers to the tendency for

people to strongly prefer avoiding losses than acquiring gains. Many studies suggest that losses are as much as twice (or even more) as psychologically powerful as gains

• The aversion to loss means that people are willing to take more risk to avoid losses than to make gains!


losses loom larger than gains …

• losses or disadvantages have a greater impact on people’s preferences than equal gains or advantages.

• When the status quo situation functions as reference point for evaluating different options, the disadvantages of leaving the status quo situation are weighted more heavily than its advantages, resulting in a bias in favour of the status quo


A simple application of loss aversion ..

• is penalty aversion. • People do not like “penalties,” they do like

“bonuses.”• But in standard economics, these are

simply two sides of the same coin: – a bonus is the absence of a penalty, a penalty

the absence of a bonus. The problem abounds in tax. A child bonus is a childless penalty, a marriage bonus is a singles penalty, and so on.


• People will act to avoid penalties but not necessarily to obtain bonuses, in rhetorically different presentations of the same underlying facts.

• Thaler found in a real-world experiment, when a gas station charged a “penalty” for using credit cards ($2 versus $1.90, say), people paid cash; when a gas station across the street gave a ”bonus” for using cash ($1.90 versus $2.00), people used credit cards.

Thaler, R. H. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior and Organization, 1, 39–60.


Some relevant biases in evaluating road pricing

• Status quo bias• Loss aversion• Framing (people react to the form of a

choice or decision problem, even where the substance is held constant) “Pricing”

• Hidden Tax Bias (people prefer hidden over visible taxes because this leads to less “hedonic pain”) no TDM, preference for gasoline tax


Preliminary conclusion …

• The seemingly harmless tendency to separate out matters in one’s mind can lead to disturbing anomalies in one’s acceptance of public tax systems

• subjects prefer policies described as “bonuses” to the self-same policies described as “penalties” or hidden to transparent taxes, tend to be affected by starting points, and fail to integrate their judgments across relevant fields of data.


3. Specific Road Related Acceptability Issues

• Results summarized are based mainly on European projects like TransPrice, AFFORD, CUPID, PATS, PRIMA, MC ICAM, TAPESTRY & DIFFERENT


Generally, RUC is the least acceptedleast accepted TDM measure (with varying degrees)

96

4

92

8

59

41

19

81

16

84

16

84

14

86

9

91

0%

25%

50%

75%

100%

Improvepublic

transport

P& R Accessrestriction

Reducingparkingspace

Increasingparking

cost

Cordonpricing

Congestionpricing

Distancebasedpricing

acceptable not acceptable


Important determinants of acceptability

• Negative personal outcome expectations (SEU) dominant (time gains are too abstract);

• „Radiation EffectRadiation Effect“ of outcome expectations: the more advantages are expected the more fair, effective and socially desired road pricing is evaluated and vice versa!

• Negative social norms, public (and published) opinion against RUC

• Doubts about general effectiveness of RUC


• Clear effect of pro-social value orientations (‚morale‘);

• No income effect• A strong positive relation to own car (and car

use), connected to values like freedom, privacy, positive social distinction

• Moderated by system characteristics like charge level, method of charging and revenue allocation (hypothecation), pricing history, objectives, local problems etc.

Important determinants of acceptability ctd.


Support for a transport package including cordon pricing

19

45

16

64

20

53

24

53

16

44

16

41

20

36

0%

25%

50%

75%

100%

Total Athens York Como Leeds Graz Madrid

Cordon pricing Package

Schlag & Schade (2000)


How to improve inter-urban road pricing acceptability in Germany: An example

• According to cognitive dissonance theory (Festinger, 1957), there is a tendency for individuals to seek consistency among their cognitions (i.e., beliefs, opinions).

• Dissonance theory postulates that when there is an inconsistency between attitudes or behaviours (dissonance), people are motivated to reduce or to eliminate the dissonance because these inconsistencies cause discomfort.


• According to dissonance theory the introduction of road pricing evokes feelings of cognitive dissonance. However, this is only the case, if the introduction is (perceived as) inescapableinescapable.

• On the one hand people favour the status quo without road pricing. On the other hand people perceive that in the future this commitment can not be maintained any longer because the introduction of road pricing is inevitable. This causes strong cognitive dissonance.

• A devaluation of road pricing in terms of negative attitudes would not be an effective strategy to reduce dissonance in the long run. In contrast, the only effective option to reduce dissonance would be to develop more positive attitudes towards road pricing.


Impact of perceived probability of RUC implementation on acceptability


• Persons who got the impression that the introduction of road pricing is almost inescapable report

– weaker social norms against the toll– less negative emotions like anger– a lower importance of toll free use of infrastructure– a weaker infringement of freedom– weaker motivations (intentions) to defend or restore personal freedom e.g. by

taking action against the toll or by evading the toll

In sum, results show that persons with a strong conviction about a definite introduction of road pricing exhibit much more positive attitudes towards road pricing than persons who are less certain about a close introduction

• It seems, that people attempt to adapt to the new situation as soon as no real alternative is available. Apparently this applies even to areas where people do not make own decisions

Additional evaluations of road pricing


4. Some Recommendations

• The objectivesobjectives of road pricing have to meet main public concerns – time gains are too abstract– do not focus on pricing but on traffic problems and

solutions people perceive as helpful.– Combine with additional issues e.g. climate change, health

issues, justice … etc.• Transport pricing measures have to be perceived as very

effectiveeffective solutions for perceived traffic problems.•• RevenuesRevenues must be redistributed and alternatives have to be

provided.•• FairnessFairness needs have to be considered very carefully

(distributional as well as procedural, which means forms of public participation).


• Problems which are not an issue in the pre- implementation phase may become more critical the closer the introduction gets (e.g. privacy which relates to technology, reliability, trust)

• Consider to implement RUC for a limited timelimited time or as a trial / experiment. May change the preference for the status quo

• keep messages short and simple,• tell stories about real people, how they benefit• communicate in the agenda of the outside world, don't

export an internal agenda, plan, jargon, or message


Thank you for your attention

regarding the acceptability of road pricing

Technology

gains losses

context of gains people

losses risk

gains loss aversion

penalty aversion

risk aversion

loss aversion loss aversion

people object pricing