A Discrete-Choice Model Approach to Optimal Congestion Change
We model the choice of transportation mode in a simplified Hotelling-like city, with a fixed number of total travellers, fixed road capacity and with no trade-off between when to travel and the time spent in a queue. A person that chooses to take her own car will inflict a congestion cost on all travellers. To get the travellers to internalise these external costs, a congestion charge has to be imposed. We derive an optimal congestion charge within in a discrete-choice framework, with a benevolent government maximising expected tax-adjusted social surplus. The congestion charge to be imposed on private driving, beyond the opportunity cost – equal to the fare on public transportation – is shown to be a weighted average of a Ramsey-like term (capturing the goal to raise public revenue) and a Pigou-term capturing the environmental cost of a person’s private driving. This property is similar to the optimal environmental tax derived by Sandmo (1975). However, the behavioural assumption underlying the present framework is quite different from the standard theory of consumer choice adopted by Sandmo.
|Date of creation:||10 Apr 2008|
|Contact details of provider:|| Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway|
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Newbery, David M, 1988. "Road Damage Externalities and Road User Charges," Econometrica, Econometric Society, vol. 56(2), pages 295-316, March.
- 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 161-179, March.
- Newbery, David M, 1987.
"Road User Charges in Britain,"
Royal Economic Society, vol. 98(390), pages 161-76, Supplemen.
- Sherman, Roger, 1971. "Congestion Interdependence and Urban Transit Fares," Econometrica, Econometric Society, vol. 39(3), pages 565-76, May.
- Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-260, May.
When requesting a correction, please mention this item's handle: RePEc:hhs:osloec:2008_009. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Magnus Gabriel Aase)
If references are entirely missing, you can add them using this form.