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The Price Of Silence: Markets For Noise Licenses And Airports

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  • Thierry Bréchet
  • Pierre M. Picard

Abstract

This article presents a market design for the management of noise pollution created by aircraft traffic around airports. A local market for noise licenses allows noise generators to compensate noise victims and to meet social acceptability. We show that the market allows the market designer to implement the social planner's optimal allocation of flights as long as the latter does not put too high a weight in his/her objective function on firms' profits compared to the disutility of noise pollution. The fact that local representatives of noise victims may be strategic players does not fundamentally alter this finding. Because of the market auctioneer's information constraints, noise licenses are likely to distribute windfall gains to residents, which alters the urban structure in the long run.

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File URL: http://hdl.handle.net/10.1111/j.1468-2354.2010.00612.x
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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 51 (2010)
Issue (Month): 4 (November)
Pages: 1097-1125

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Handle: RePEc:ier:iecrev:v:51:y:2010:i:4:p:1097-1125

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  1. A. Ellerman, 2005. "A Note on Tradeable Permits," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 123-131, 06.
  2. Jon P. Nelson, 2004. "Meta-Analysis of Airport Noise and Hedonic Property Values," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 38(1), pages 1-27, January.
  3. Juan-Pablo Montero, 2006. "A simple auction mechanism for the optimal allocation of the commons," Working Papers 0608, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  4. Morrison, Steven A & Winston, Clifford & Watson, Tara, 1999. "Fundamental Flaws of Social Regulation: The Case of Airplane Noise," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 723-43, October.
  5. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  6. Schipper, Youdi, 2004. "Environmental costs in European aviation," Transport Policy, Elsevier, vol. 11(2), pages 141-154, April.
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Cited by:
  1. Thierry Bréchet & Pierre M. Picard, 2010. "The Economics of Airport Noise: Managing Markets for Noise Licenses," CREA Discussion Paper Series 10-13, Center for Research in Economic Analysis, University of Luxembourg.
  2. BRECHET, Thierry & PICARD, Pierre M., . "The economics of airport noise: How to manage markets for noise licenses," CORE Discussion Papers RP -2427, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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