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articles: The implementation of marginal external cost pricing in road transport Long run vs short run and first-best vs second-best

Author

Listed:
  • Erik T. Verhoef

    (Department of Spatial Economics, Free University Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands)

Abstract

This article discusses a number of issues that will become increasingly important now that the concept of marginal external cost pricing becomes more likely to be implemented as a policy strategy in transport in reality. The first part of the article deals with the long-run efficiency of marginal external cost pricing. It is shown that such prices not only optimize short-run mobility, given the shape and position of the relevant demand and cost curves, but even more importantly, also optimally affect the factors determining the shape and position of these curves in the long run. However, first-best prices are a hypothetical bench-mark only. The second part of the article is therefore concerned with more realistic pricing options. The emphasis is on the derivation of second-best pricing rules. Four types of second-best distortions are considered: distortions on other routes, in other modes, in other economic sectors, and due to government budget constraints.

Suggested Citation

  • Erik T. Verhoef, 2000. "articles: The implementation of marginal external cost pricing in road transport Long run vs short run and first-best vs second-best," Papers in Regional Science, Springer;Regional Science Association International, vol. 79(3), pages 307-332.
    • Handle: RePEc:spr:presci:v:79:y:2000:i:3:p:307-332
    Note: Received: 3 August 1998
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    Citations

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    Cited by:

    1. Peer, Stefanie & Verhoef, Erik T., 2013. "Equilibrium at a bottleneck when long-run and short-run scheduling preferences diverge," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 12-27.
    2. Carmona, Miguel, 2010. "The regulatory function in public-private partnerships for the provision of transport infrastructure," Research in Transportation Economics, Elsevier, vol. 30(1), pages 110-125.
    3. Tikoudis, Ioannis & Verhoef, Erik T. & van Ommeren, Jos N., 2018. "Second-best urban tolls in a monocentric city with housing market regulations," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 342-359.
    4. Coria, Jessica & Bonilla, Jorge & Grundström, Maria & Pleijel, Håkan, 2015. "Air pollution dynamics and the need for temporally differentiated road pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 75(C), pages 178-195.
    5. Macharis, Cathy & Van Hoeck, Ellen & Pekin, Ethem & van Lier, Tom, 2010. "A decision analysis framework for intermodal transport: Comparing fuel price increases and the internalisation of external costs," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(7), pages 550-561, August.
    6. Santos, Georgina & Behrendt, Hannah & Maconi, Laura & Shirvani, Tara & Teytelboym, Alexander, 2010. "Part I: Externalities and economic policies in road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 2-45.
    7. Fumitoshi Mizutani & Yusuke Suzuki & Shuji Uranishi, 2017. "Magnitude of external costs of highways in Japan," Asia-Pacific Journal of Regional Science, Springer, vol. 1(2), pages 337-357, October.
    8. Verhoef, Erik T., 2020. "Optimal congestion pricing with diverging long-run and short-run scheduling preferences," Transportation Research Part B: Methodological, Elsevier, vol. 134(C), pages 191-209.
    9. Stephen Glaister & Daniel J. Graham, 2006. "Proper Pricing for Transport Infrastructure and the Case of Urban Road Congestion," Urban Studies, Urban Studies Journal Limited, vol. 43(8), pages 1395-1418, July.
    10. Button, Kenneth, 2004. "1. The Rationale For Road Pricing: Standard Theory And Latest Advances," Research in Transportation Economics, Elsevier, vol. 9(1), pages 3-25, January.
    11. Zhi-Chun Li & Qian-Wen Guo, 2017. "Optimal time for implementing cordon toll pricing scheme in a monocentric city," Papers in Regional Science, Wiley Blackwell, vol. 96(1), pages 163-190, March.
    12. Kockelman, Kara M. & Lemp, Jason D., 2011. "Anticipating new-highway impacts: Opportunities for welfare analysis and credit-based congestion pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(8), pages 825-838, October.
    13. Liu, L. N. & Boyce, David E., 2002. "Variational inequality formulation of the system-optimal travel choice problem and efficient congestion tolls for a general transportation network with multiple time periods," Regional Science and Urban Economics, Elsevier, vol. 32(5), pages 627-650, September.
    14. repec:rre:publsh:v:39:y:2009:i:1:p:85-98 is not listed on IDEAS
    15. Miki Malul & Raphael Bar-El, 2009. "The Gap between Free Market and Social Optimum in the Location Decision of Economic Activity," Urban Studies, Urban Studies Journal Limited, vol. 46(10), pages 2045-2059, September.

    More about this item

    Keywords

    externalities; Pigouvian taxation; road transport; second-best;
    All these keywords.

    JEL classification:

    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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