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The Implementation of Marginal External Cost Pricing in Road Transport

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  • Erik T. Verhoef

    ()
    (Vrije Universiteit Amsterdam)

Abstract

This paper discusses a number of issues that will become increasingly important nowthat the concept of marginal external cost pricing becomes more likely to be implementedas a policy strategy in transport in reality. The first part of the paper deals with thelong-run efficiency of marginal external cost pricing. It is shown that such prices notonly optimize short-run mobility, given the shape and position of the relevant demandand cost curves, but even more importantly, also optimally affect the factors determiningthe shape and position of these curves in the long run. However, first-best prices are ahypothetical bench-mark only. The second part of the paper is therefore concerned withmore realistic pricing options. The emphasis is on the derivation of second-best pricingrules. Four types of second-best distortions are considered: distortions on other routes,in other modes, in other economic sectors, and, finally, due to government budgetconstraints.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 98-091/3.

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Date of creation: 27 Aug 1998
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Handle: RePEc:dgr:uvatin:19980091

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Web page: http://www.tinbergen.nl

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  1. Richard Arnott & Andre de Palma & Robin Lindsey, 1985. "Economics of a Bottleneck," Working Papers 636, Queen's University, Department of Economics.
  2. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1995. "The economics of regulatory parking policies: The (IM)possibilities of parking policies in traffic regulation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 29(2), pages 141-156, March.
  3. Mishan, E J, 1971. "The Postwar Literature on Externalities: An Interpretative Essay," Journal of Economic Literature, American Economic Association, vol. 9(1), pages 1-28, March.
  4. Glazer, Amihai & Niskanen, Esko, 2001. "Parking fees and congestion," University of California Transportation Center, Working Papers qt9h51t02k, University of California Transportation Center.
  5. Verhoef, Erik T., 2002. "Second-best congestion pricing in general static transportation networks with elastic demands," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 281-310, May.
  6. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, April.
  7. Arnott, Richard J., 1979. "Unpriced transport congestion," Journal of Economic Theory, Elsevier, vol. 21(2), pages 294-316, October.
  8. E T Verhoef & J C J M van den Bergh & K J Button, 1997. "Transport, spatial economy, and the global environment," Environment and Planning A, Pion Ltd, London, vol. 29(7), pages 1195-1213, July.
  9. Wilson, John D., 1983. "Optimal road capacity in the presence of unpriced congestion," Journal of Urban Economics, Elsevier, vol. 13(3), pages 337-357, May.
  10. Sullivan, Arthur M., 1983. "Second-best policies for congestion externalities," Journal of Urban Economics, Elsevier, vol. 14(1), pages 105-123, July.
  11. Edward Calthrop & Stef Proost, 1998. "Road Transport Externalities," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 335-348, April.
  12. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
  13. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September.
  14. Laih, Chen-Hsiu, 1994. "Queueing at a bottleneck with single- and multi-step tolls," Transportation Research Part A: Policy and Practice, Elsevier, vol. 28(3), pages 197-208, May.
  15. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
  16. Braid, Ralph M., 1989. "Uniform versus peak-load pricing of a bottleneck with elastic demand," Journal of Urban Economics, Elsevier, vol. 26(3), pages 320-327, November.
  17. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, April.
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