Wednesday, March 28, 2007

How Much Would You Pay to Drive in the HOV Lane?

Here is an example of the unintended consequences that arise when the government imposes quotas and price controls.

Californians appear willing to pay $4,000 more for used gasoline-electric hybrid vehicles that have state-issued carpool stickers than for hybrids that don't, according to a sampling of prices by Kelley Blue Book for USA TODAY.

The stickers allow low-polluting hybrids to use less-crowded, faster-moving carpool lanes, even if the driver is alone in the car. The state quit issuing stickers to hybrids last month after hitting a self-imposed cap of 85,000. Those already issued are valid through 2011 and stay with the car when it's sold, benefiting subsequent owners.

(Source: Marginal Revolution)

10 comments:

Anonymous said...

Seeing that these people are willing to pay an extra $4,000 just for a sticker seems to be kind of silly. But after looking at the costs and benefits it becomes clear as to why they pay so much. First of all I don't really know what the fine is for riding in the HOV lane in cali. alone without one of these stickers but chances are its lower than $4,000 (I'll guess high at $500). It seems that they wouldn't get caught using the HOV lane most of the time so I would relate this back to the costs of speeding. If there is a 5% chance that they will get caught in the HOV lane and the fine is $500, that would be a cost of $25 everytime you use the HOV lane. It would make sense for the people that are going to be using the HOV lane more than 160 times in the next 4-5 years to buy one of these cars for only $4,000. The stickers are actually a really good deal for people who would be using the lane alot, but not so great for those who use it less frequently. (looking back the fine is probably much less than $500)
- James C

Chip said...

I think that the state adding value to hybrid cars is not the best idea for them. With an increased price of used hybrids there will be a lower quantity demanded and some of the hybrids will not be sold as used cars which actually will decrease the number of hybrids on the road. A better solution for California would be to allow all hybrids to use HOV lanes and possibly expand the HOV lane to 2 or 3 lanes. Repainting the road is not a very costly solution and people who are stuck with gasoline powered will be more inclined to buy a hybrid because of the more intense traffic in the non-HOV lanes. This change may seem drastic but if spread out over a few years California would see a dramatic increase in number of hybrid cars bought and eventually would be able to phase out gas power altogether.

Anonymous said...

This is a sweet deal for Toyota Prius' as David Ford said, "Someone buying a used car might be encouraged to buy a Prius." If there is an increased demand for the sticker and a low supply of the Prius, the price of even a used Prius would be high, as for some people, saving that half-an-hour a day may really be worth that price. Another reason for people to pay that extra $4,000 for the sticker is that in the long run, they will end up saving money that they would have used to pay for the gas that would be consumed waiting in traffic. All in all, if the consumer's marginal benefit exceeds the cost of $4,000 for the sticker, the consumer should purchase it.
- Gautam Rao

Anonymous said...

Since the whole reason the HOV lane was created was to help lower pollution rates, I feel that allowing low emission hybrids to enter the HOV lane is a great idea. One thing i see wrong with it is that the more people that are able to ride in the HOV lane then the slower it will go and it will thus lose its appeal to many people. I feel that California thought of that when they put a cap on the number of stickers sold. So with that in mind then the HOV lane will always be moving faster then the other lanes a benefitting its consumers. Obviously enough people were willing to pay $4,000 to buy the stickers. The state is able to make money by encouraging people to lower pollution, while the consumer is benefitting from a faster travel time. The plan is perfect becuase it is a win for the environment, the consumer, and the government funds. The governemnt should try to create more scenerious in which this is possible.

seth

Anonymous said...

I think that it is a good idea to offer these rewards for willing customers. Not only do customers get to enjoy the fast-moving HOV lanes with less traffic, the state makes some money by charging them to ride in it. It is a win-win situation. In some parts of California, especially LA, traffic is infamous as being terrible, so some drivers might pay the extra fee to relieve that stress that is associated with that traffic. It is an interesting idea to be instated and I would like to know if it is very successful because Atlanta could use something like this. Traffic is awful in Atlanta, and this might be a way to decrease traffic and increase revenue for the state of Georgia.

-Chris Templin

Anonymous said...

The government is hurting hybrid car manufacturers by making it more alluring to buy a used hybrid with a sticker than a new one without it. I agree with Chip’s suggestion to let all hybrids drive in the HOV lane and expanding the HOV lane into lanes. The purpose of the HOV lane is to credit those who are carpooling and causing less pollution. Since all hybrids definitely fit in the second category, I think it is only fair that they are included. Obviously, to the consumers who are buying the used cars with stickers the benefit of less traffic and a faster drive time exceeds the $4,000 it cost them to get that sticker. Like many people above my post have said, this creates a situation in which everyone (the government, environment, and drivers) can gain benefit.
--Natalie--

Anonymous said...

Although I do think it is crazy to spend $4,000 to ride in the carpool lane, I do believe that gas/electric cars should be able to ride in the HOV lane. The purpose of the lane is to encourage carpooling and, therefore, cut down on polution. But hybrid and electric cars do not polute as much as regular gas cars. Therefore I believe that they should be able to drive in the HOV lane free of cost. Then again, it is California, and they have somw wacko politicians out there with some crazy ideas. For example, they make people pay $4,000 to drive their hybrid or electric car in the HOV lane. I propose that all cars that do not use pure gasoline should be allowed in the HOV lane for free. It would encourage people to buy non-gas cars, therefore cutting down on emissions.

Bryan West

Anonymous said...

My mom used to have a company car that ran on natural gas, and she could always ride in the HOV lane by herself, and I agree with Bryan that all alternatively-feuled cars should probably be allowed to ride in the HOV lane for free. However, I also see how the fact that people are willing to pay $4000 for that privelidge is a good way for the government to make money off of the whole thing and maybe use it to build more roads....
-Carrie

Michael A said...

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Michael A - Walker said...

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