Second-best Congestion Pricing Schemes in the Monocentric City
AbstractThis paper considers second-best congestion pricing in the monocentric city, with endogenous residential density and endogenous labour supply. A spatial general equilibrium model is developed that allows consideration of the three-way interactions between urban density, traffic congestion and labour supply. Congestion pricing schemes are analyzed that are second best ‘by design’ (and not because distortions exist elsewhere in the spatial economy), like cordon charging and flat kilometre charges. Both for Cobb-Douglas utility and for CES utility, the analyses suggest that the relative welfare losses from second-best pricing, compared to first-best pricing, are surprisingly small. *Affiliated to the Tinbergen Institute, Roetersstraat 31, 1018 WB Amsterdam. Key words: Traffic congestion, second-best pricing, urban structure, spatial general equilibrium JEL codes: R41, R48, D62
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Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p408.
Date of creation: Aug 2004
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Other versions of this item:
- Verhoef, Erik T., 2005. "Second-best congestion pricing schemes in the monocentric city," Journal of Urban Economics, Elsevier, vol. 58(3), pages 367-388, November.
- Erik T. Verhoef, 2004. "Second-best Congestion Pricing Schemes in the Monocentric City," Tinbergen Institute Discussion Papers 04-110/3, Tinbergen Institute.
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-09 (All new papers)
- NEP-GEO-2005-11-09 (Economic Geography)
- NEP-MIC-2005-11-09 (Microeconomics)
- NEP-URE-2005-11-09 (Urban & Real Estate Economics)
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