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The Ramsey Problem for Congestible Facilities

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  • Richard Arnott
  • Marvin Kraus

Abstract

In recent years, a new set of models drawing on Vickrey [1969] has been developed to analyze the economics of congestible facilities. These models are structural in that they derive the cost function from consumers' time-of-use decisions and the congestion technology. Standard models, in contrast, simply assume the general form of the cost function. We apply the new approach to analyze the Ramsey problem for a congestible facility, and show that the solution generally entails cost inefficiency. Standard models have failed to reveal this result because they treat the cost function as completely determined by technology.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0084.

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Date of creation: May 1994
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Publication status: published as Journal of Public Economics, Vol. 50 (1993) pp. 371-396
Handle: RePEc:nbr:nberte:0084

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  1. Guesnerie, Roger & Roberts, Kevin, 1984. "Effective Policy Tools and Quantity Controls," Econometrica, Econometric Society, vol. 52(1), pages 59-86, January.
  2. Richard Arnott & Andre de Palma & Robin Lindsey, 1987. "Bottleneck Congestion with Elastic Demand," Working Papers 690, Queen's University, Department of Economics.
  3. Sam Bucovetsky, 1984. "On the Use of Distributional Waits," Canadian Journal of Economics, Canadian Economics Association, vol. 17(4), pages 699-717, November.
  4. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-83, June.
  5. Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-79, June.
  6. Alan J. Auerbach, 1982. "The Theory of Excess Burden and Optimal Taxation," NBER Working Papers 1025, National Bureau of Economic Research, Inc.
  7. Smith, M. J., 1983. "The existence and calculation of traffic equilibria," Transportation Research Part B: Methodological, Elsevier, vol. 17(4), pages 291-303, August.
  8. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
  9. 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.
  10. Mohring, Herbert, 1970. "The Peak Load Problem with Increasing Returns and Pricing Constraints," American Economic Review, American Economic Association, vol. 60(4), pages 693-705, September.
  11. Greenwald, Bruce C & Stiglitz, Joseph E, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 229-64, May.
  12. Guesnerie Roger, 1979. "Second best pricing rules in the boiteux tradition : derivation, review and discussion," CEPREMAP Working Papers (Couverture Orange) 7920, CEPREMAP.
  13. Richard Arnott, 1986. "Information and Time-Of-Use Decisions in Stochastically Congestable Facilities," Discussion Papers 788, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Cited by:
  1. Segendorff, Björn, 1995. "The Telecommunication Market: A Survey of Theory and Empirics," Working Paper Series 442, Research Institute of Industrial Economics.
  2. Richard Arnott & Marvin Kraus, 1995. "Self-Financing of Congestible Facilities in a Growing Economy," Boston College Working Papers in Economics 304., Boston College Department of Economics.
  3. Adriaan Hendrik van der Weijde & Erik T. Verhoef & Vincent van den Berg, 2012. "Competition in Multi-Modal Transport Networks: A Dynamic Approach," Tinbergen Institute Discussion Papers 12-116/VIII, Tinbergen Institute.
  4. Emanuela Randon, . "Measuring Nash Equilibrium Consumption Externalities," Discussion Papers 04/08, Department of Economics, University of York.
  5. Yang, Hai & Ye, Min & Tang, Wilson H. & Wong, S.C., 2005. "Regulating taxi services in the presence of congestion externality," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(1), pages 17-40, January.
  6. Boronico, Jess S. & Siegel, Philip H., 1998. "Capacity planning for toll roadways incorporating consumer wait time costs," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(4), pages 297-310, May.
  7. Vincent van den Berg & Erik T. Verhoef, 2011. "Congesting Pricing in a Road and Rail Network with Heterogeneous Values of Time and Schedule Delay," Tinbergen Institute Discussion Papers 11-059/3, Tinbergen Institute, revised 24 May 2012.

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