Adopt value-based pricing for Singapore roads

When demand exceeded supply, the prices were adjusted to reflect the peak and off-peak usage to achieve equilibrium.
When demand exceeded supply, the prices were adjusted to reflect the peak and off-peak usage to achieve equilibrium. PHOTO: ST FILE

The opening of new roads and underpasses will no doubt expand road capacity and ease traffic congestion in Singapore (New lane added to PIE ahead of Changi Jewel's opening, March 19; and Rest of Lornie Highway to open on April 19, March 20).

The question is: Who pays and how to charge a fair price?

A quick fix would be to install more Electronic Road Pricing (ERP) gantries.

Maybe we should holistically review our existing road pricing approach.

While Uber started out as a product of the sharing economy, the technology it developed also revolutionised pricing and disrupted many industries.

From a value-based pricing perspective, Uber ticked all the boxes. Passengers were charged based on their willingness to pay in accordance with the value they placed on their need to travel to a specific destination at a certain time of the day, given the known price.

When demand exceeded supply, the prices were adjusted to reflect the peak and off-peak usage to achieve equilibrium.

This discriminatory pricing strategy has allowed market forces to perform its wonder.

The Land Transport Authority (LTA) should consider implementing this pricing methodology on our roads.

Every vehicle or vehicle owner can be provided with an app which will tell how much it costs to travel to a location, with the road pricing varying during the day.

They can be charged a toll for the actual distance travelled.

The toll rate will vary during the day depending on traffic conditions based on certain algorithms.

The current ERP scheme is less effective comparatively as not all road users are aware of the various charges at different times and locations.

Without primacy and realistic price information, motorists cannot make better-informed decisions.

While road tax addresses the equity element of paying for road usage on top of just trying to lighten traffic congestion during peak hours, it distorts economic pricing in that light road users are subsidising heavy road users.

Charging road tax based on vehicle capacity is a further injustice as the correlation is weak.

If we can implement a dynamic pricing strategy, we can put paid to road tax and ERP schemes.

Singapore has always been at the forefront of using technology to tackle urban solutions. I hope this dynamic pricing strategy can be a useful tool in our approach towards enhancing the travel experience.

Ee Teck Siew

A version of this article appeared in the print edition of The Straits Times on March 23, 2019, with the headline 'Adopt value-based pricing for Singapore roads'. Print Edition | Subscribe