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When Are Anonymous Congestion Charges Consistent with Marginal Cost Pricing?

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  • Richard Arnott
  • Marvin Kraus

Abstract

There are constraints on pricing congestible facilities. First, if heterogeneous users are observationally indistinguishable, then congestion charges must be anonymous. Second, the time variation of congestion charges may be constrained. Do these constraints undermine the feasibility of marginal cost pricing, and hence the applicability of the first-best theory of congestible facilities? We show that if heterogeneous users behave identically when using the congestible facility and if the time variation of congestion charges is unconstrained, then marginal cost pricing is feasible with anonymous congestion charges. If, however, the time variation of congestion charges is constrained, optimal pricing with anonymous congestion charges entails Ramsey pricing.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0154.

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Date of creation: Apr 1994
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Publication status: published as Arnott, Richard and Marvin Kraus. "When Are Anonymous Congestion Charges Consistent With Marginal Cost Pricing?," Journal of Public Economics, 1998, v67(1,Jan), 45-64.
Handle: RePEc:nbr:nberte:0154

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  1. 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.
  2. Dorfman, Robert, 1969. "An Economic Interpretation of Optimal Control Theory," American Economic Review, American Economic Association, vol. 59(5), pages 817-31, December.
  3. Braeutigam, Ronald R., 1989. "Optimal policies for natural monopolies," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 23, pages 1289-1346 Elsevier.
  4. Richard Arnott & Marvin Kraus, 1993. "Financing Capacity On The Bottleneck Model," Boston College Working Papers in Economics 222, Boston College Department of Economics.
  5. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-79, March.
  6. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
  7. Henderson, J. Vernon, 1981. "The economics of staggered work hours," Journal of Urban Economics, Elsevier, vol. 9(3), pages 349-364, May.
  8. Berglas, Eitan & Pines, David, 1981. "Clubs, local public goods and transportation models : A synthesis," Journal of Public Economics, Elsevier, vol. 15(2), pages 141-162, April.
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