Mileage-Based User Fee Demonstration Project

Status: Complete
Report Date: 10/10/2006

Summary:

The Federal Highway Administration and the Minnesota Department of Transportation co-sponsored a demonstration to test how consumers would change their driving behavior if some of the fixed costs of owning and operating a car were to be converted to variable costs. One hundred and thirty participants were given devices that recorded mileage and time of travel. Prices per mile were assigned randomly to each participant, ranging from 5 cents per mile to 25 cents per mile. The findings indicate that per mile pricing does result in measurable, but small reductions in driving. The largest effect is on weekend driving and on peak weekday travel (as some participants were able to substitute mass transit for their vehicle). One key finding in this experiment is that those households that are willing to change their driving behavior will do so with low per mile cost incentives. On the other hand it was also determined that those households unable to change their behavior do not do so even under relatively higher cost incentives. Therefore, the marginal effect of per mile prices seems to drop off dramatically after some point in the lower range of prices.

Project Personnel:

Principal Investigator: Jeffrey Buxbaum

Technical Liaison: Kenneth Buckeye

Project Coordinator: Jim Klessig

Panel Members:
Abigail McKenzie - Investment Management
Amy Vennewitz - Metropolitan Council
Daryl Taavola - AECOM
Gary Barnes - Humphrey Inst of Public Affairs
John Williams - MN House Research Dept.
Max Donath - University of Minnesota
Norman Foster - Chief Financial Officer
Susan Moe - Federal Highway Administration
Thomas Stinson - U of M - Dept. of Applied Economics

Final Deliverables:

Mileage-Based User Fee Demonstration Project: Pay-As-You-Drive Experimental Findings (Report #2006-39A)
Mileage-Based User Fee Demonstration Project: Market Assessment Survey Results (Report #2006-39B)
Mileage-Based User Fee Demonstration Project: Potential Public Policy Implications of Pay-As-You-Drive Leasing and Insurance Products (Report #2006-39C)