Why supermarkets don’t use congestion pricing
Feb 27, 2011
3 minute read

Timothy Lee asks why, if congestion pricing is so great, do we not observe it in use in a number of private commercial settings? In particular, when you check out at the grocery store, why is there not a higher-priced, speedier first-class lane? If the free market adopts policies that cater to the preferences of its customers, then it seems clear that its customers place a higher value on equal treatment than they do on getting out of the store quickly. This gives us good reason, Tim argues, to suppose that congestion pricing of roads would not satisfy consumer preferences better than equal treatment in driving, even if equal treatment results in more congestion.

I have a different take. Suppose that consumers have varying preferences over time spent waiting in line at the grocery store. Many of these consumers also take non-zero (though not infinitely high) offense at being treated unequally. The consumers can also differ in other ways.

With these preferences, the free market is unlikely to produce congestion pricing in grocery stores because it can produce different classes of stores instead. At Yuppymart, the prices are a little higher, there are more cashiers, and the lines are shorter. At Ghettomart, the prices are lower, but you have to wait in line longer. But at either store, all customers are treated equally; the free market satisfies the preference for equal treatment and approximates the efficiency criterion that those with a higher value of time should not have to wait as long.

Now suppose that all consumers, even those with a high time preference, were forced to patronize the same store. In this scenario, the preference for equal treatment comes into greater conflict with the efficiency criterion. Since the offense taken at unequal treatment is finite by assumption, it’s possible that the gains from adopting congestion pricing will be greater than the losses from offending a bunch of people. Indeed, I think this is almost certainly what would happen. The free market supplies congestion pricing when it does not have some other outlet for expressing consumers’ varying time preferences.

In the context of roads, it seems likely that notwithstanding our preferences for equal treatment, some form of congestion pricing is efficient. High value-of-time consumers do not have alternative road systems on which they can express their preferences for low congestion. So contra Tim, I don’t think that we can infer from the absence of congestion pricing in supermarkets that it should not be used on roadways, though do read his superb Ars Technica piece on the privacy implications of congestion tolling.