IDEAS home Printed from https://ideas.repec.org/p/irv/wpaper/080915.html
   My bibliography  Save this paper

Manipulable Congestion Tolls

Author

Listed:
  • Jan K. Brueckner
  • Erik T. Verhoef

    (Department of Spacial Economics, VU University, Amsterdam)

Abstract

The recent literature on congestion pricing with large agents contains a remarkable inconsistency: though agents are large enough to recognize self-imposed congestion and exert market power over prices, they do not take into account the impact of their own actions on the magnitude of congestion tolls. When large agents are confronted with tolls derived under this parametric assumption but understand the rule used to generate them, the toll system will no longer guide the market to the social optimum. To address this problem, the present paper derives alternate, manipulable toll rules, which are designed to achieve the social optimum when agents anticipate the full impact of their actions on toll liabilities.

Suggested Citation

  • Jan K. Brueckner & Erik T. Verhoef, 2009. "Manipulable Congestion Tolls," Working Papers 080915, University of California-Irvine, Department of Economics.
    • Handle: RePEc:irv:wpaper:080915
    as

    Download full text from publisher

    File URL: https://www.economics.uci.edu/files/docs/workingpapers/2008-09/brueckner-15.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
    2. Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 753-765.
    3. Brueckner, Jan K., 2005. "Internalization of airport congestion: A network analysis," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 599-614, September.
    4. Brueckner, Jan K. & Van Dender, Kurt, 2008. "Atomistic congestion tolls at concentrated airports? Seeking a unified view in the internalization debate," Journal of Urban Economics, Elsevier, vol. 64(2), pages 288-295, September.
    5. Verhoef, Erik T., 2010. "Congestion pricing, slot sales and slot trading in aviation," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 320-329, March.
    6. Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-370, March.
    7. Forbes, Silke J., 2008. "The effect of air traffic delays on airline prices," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1218-1232, September.
    8. Basso, Leonardo J. & Zhang, Anming, 2007. "Congestible facility rivalry in vertical structures," Journal of Urban Economics, Elsevier, vol. 61(2), pages 218-237, March.
    9. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
    10. Daniel, Joseph I. & Harback, Katherine Thomas, 2009. "Pricing the major US hub airports," Journal of Urban Economics, Elsevier, vol. 66(1), pages 33-56, July.
    11. Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
    12. Daniel, Joseph I. & Harback, Katherine Thomas, 2008. "(When) Do hub airlines internalize their self-imposed congestion delays?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 583-612, March.
    13. Zhang, Anming & Zhang, Yimin, 2006. "Airport capacity and congestion when carriers have market power," Journal of Urban Economics, Elsevier, vol. 60(2), pages 229-247, September.
    14. Daniel, Joseph I. & Pahwa, Munish, 2000. "Comparison of Three Empirical Models of Airport Congestion Pricing," Journal of Urban Economics, Elsevier, vol. 47(1), pages 1-38, January.
    15. Daniel, Joseph I., 2001. "Distributional Consequences of Airport Congestion Pricing," Journal of Urban Economics, Elsevier, vol. 50(2), pages 230-258, September.
    16. Pels, Eric & Verhoef, Erik T., 2004. "The economics of airport congestion pricing," Journal of Urban Economics, Elsevier, vol. 55(2), pages 257-277, March.
    17. Johnson, Tracy & Savage, Ian, 2006. "Departure delays, the pricing of congestion, and expansion proposals at Chicago O’Hare Airport," Journal of Air Transport Management, Elsevier, vol. 12(4), pages 182-190.
    18. Brueckner, Jan K., 2009. "Price vs. quantity-based approaches to airport congestion management," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 681-690, June.
    19. Kraus, Marvin & Mohring, Herbert, 1975. "The Role of Pollutee Taxes in Externality Problems," Economica, London School of Economics and Political Science, vol. 42(166), pages 171-176, May.
    20. Steven A. Morrison & Clifford Winston, 2007. "Another Look at Airport Congestion Pricing," American Economic Review, American Economic Association, vol. 97(5), pages 1970-1977, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    2. Silva, Hugo E. & Verhoef, Erik T. & van den Berg, Vincent A.C., 2014. "Airline route structure competition and network policy," Transportation Research Part B: Methodological, Elsevier, vol. 67(C), pages 320-343.
    3. Lin, Ming Hsin, 2013. "Airport privatization in congested hub–spoke networks," Transportation Research Part B: Methodological, Elsevier, vol. 54(C), pages 51-67.
    4. Dementyeva, Maria & Koster, Paul R. & Verhoef, Erik T., 2015. "Regulation of road accident externalities when insurance companies have market power," Journal of Urban Economics, Elsevier, vol. 86(C), pages 1-8.
    5. Schwarz, Gregor & Bichler, Martin, 2022. "How to trade thirty thousand products: A wholesale market design for road capacity," Transportation Research Part A: Policy and Practice, Elsevier, vol. 164(C), pages 167-185.
    6. Silva, Hugo E. & Verhoef, Erik T. & van den Berg, Vincent A.C., 2014. "Airlines’ strategic interactions and airport pricing in a dynamic bottleneck model of congestion," Journal of Urban Economics, Elsevier, vol. 80(C), pages 13-27.
    7. Aravena, Olivia & Basso, Leonardo J. & Figueroa, Nicolás, 2019. "Effects of asymmetric information on airport congestion management mechanisms," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 4-27.
    8. De Borger, Bruno & Glazer, Amihai & Proost, Stef, 2022. "Strategic behavior under tradeable driving permits and congestion tolls: A political economy model," Journal of Urban Economics, Elsevier, vol. 128(C).
    9. Kidokoro, Yukihiro & Zhang, Anming, 2018. "Airport congestion pricing and cost recovery with side business," Transportation Research Part A: Policy and Practice, Elsevier, vol. 114(PA), pages 222-236.
    10. Hoffman, Karla & Berardino, Frank & Hunter, George, 2013. "Congestion pricing applications to manage high temporal demand for public services and their relevance to air space management," Transport Policy, Elsevier, vol. 28(C), pages 28-41.
    11. Vincent A.C. van den Berg & Erik T. Verhoef, 2011. "Is the Service Quality of Private Roads too Low, too High, or just Right when Firms compete Stackelberg in Capacity?," Tinbergen Institute Discussion Papers 11-079/3, Tinbergen Institute, revised 02 Aug 2012.
    12. Czerny, Achim I. & Zhang, Anming, 2014. "Airport peak-load pricing revisited: The case of peak and uniform tolls," Economics of Transportation, Elsevier, vol. 3(1), pages 90-101.
    13. Vincent Van Den Berg, 2011. "The effect of private road supply on the volume/capacity ratio when firms compete Stackelberg in Road Capacity," ERSA conference papers ersa11p1203, European Regional Science Association.
    14. Gong, Zhenwei & Zhang, Fangni & Liu, Wei & Graham, Daniel J., 2023. "On the effects of airport capacity expansion under responsive airlines and elastic passenger demand," Transportation Research Part B: Methodological, Elsevier, vol. 170(C), pages 48-76.
    15. Evangelinos, Christos, 2013. "Interessengruppen und Preissetzung im Verkehr," Discussion Papers 2/2013, Technische Universität Dresden, "Friedrich List" Faculty of Transport and Traffic Sciences, Institute of Transport and Economics.
    16. Doi, Naoshi & Kono, Tatsuhito & Suzaki, Izumo, 2023. "Optimizing Multiple Airport Charges with Endogenous Airline Quality Considering the Marginal Cost of Public Funds," MPRA Paper 116176, University Library of Munich, Germany.
    17. Achim I. Czerny & Kay Mitusch & Andreas Tanner, 2010. "Priority Rules Versus Scarcity Premiums in Rail Markets," WHU Working Paper Series - Economics Group 10-03, WHU - Otto Beisheim School of Management.
    18. Dixit, Aasheesh & Kumar, Patanjal & Jakhar, Suresh Kumar, 2022. "Effectiveness of carbon tax and congestion cost in improving the airline industry greening level and welfare: A case of two competing airlines," Journal of Air Transport Management, Elsevier, vol. 100(C).
    19. Zhang, Anming & Zhang, Yimin, 2010. "Airport capacity and congestion pricing with both aeronautical and commercial operations," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 404-413, March.
    20. Brueckner, Jan K., 2009. "Price vs. quantity-based approaches to airport congestion management," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 681-690, June.
    21. Verhoef, Erik T., 2017. "Cost recovery of congested infrastructure under market power," Journal of Urban Economics, Elsevier, vol. 101(C), pages 45-56.
    22. Verhoef, Erik T. & Silva, Hugo E., 2017. "Dynamic equilibrium at a congestible facility under market power," Transportation Research Part B: Methodological, Elsevier, vol. 105(C), pages 174-192.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brueckner, Jan K., 2009. "Price vs. quantity-based approaches to airport congestion management," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 681-690, June.
    2. Silva, Hugo E. & Verhoef, Erik T. & van den Berg, Vincent A.C., 2014. "Airlines’ strategic interactions and airport pricing in a dynamic bottleneck model of congestion," Journal of Urban Economics, Elsevier, vol. 80(C), pages 13-27.
    3. Brueckner, Jan K. & Van Dender, Kurt, 2008. "Atomistic congestion tolls at concentrated airports? Seeking a unified view in the internalization debate," Journal of Urban Economics, Elsevier, vol. 64(2), pages 288-295, September.
    4. Silva, Hugo E. & Verhoef, Erik T., 2013. "Optimal pricing of flights and passengers at congested airports and the efficiency of atomistic charges," Journal of Public Economics, Elsevier, vol. 106(C), pages 1-13.
    5. Ater, Itai, 2012. "Internalization of congestion at US hub airports," Journal of Urban Economics, Elsevier, vol. 72(2), pages 196-209.
    6. Jan K. Brueckner, 2008. "Slot-Based Approaches to Airport Congestion Management," CESifo Working Paper Series 2302, CESifo.
    7. Dixit, Aasheesh & Jakhar, Suresh Kumar, 2021. "Airport capacity management: A review and bibliometric analysis," Journal of Air Transport Management, Elsevier, vol. 91(C).
    8. Basso, Leonardo J. & Zhang, Anming, 2010. "Pricing vs. slot policies when airport profits matter," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 381-391, March.
    9. Czerny, Achim I., 2010. "Airport congestion management under uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 371-380, March.
    10. Rupp, Nicholas G., 2009. "Do carriers internalize congestion costs? Empirical evidence on the internalization question," Journal of Urban Economics, Elsevier, vol. 65(1), pages 24-37, January.
    11. Zhang, Anming & Zhang, Yimin, 2010. "Airport capacity and congestion pricing with both aeronautical and commercial operations," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 404-413, March.
    12. Czerny, Achim I. & Zhang, Anming, 2014. "Airport congestion pricing when airlines price discriminate," Transportation Research Part B: Methodological, Elsevier, vol. 65(C), pages 77-89.
    13. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    14. Gillen, David & Jacquillat, Alexandre & Odoni, Amedeo R., 2016. "Airport demand management: The operations research and economics perspectives and potential synergies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 495-513.
    15. Noto, Claudio, 2020. "Airport slots, secondary trading, and congestion pricing at an airport with a dominant network airline," Research in Transportation Economics, Elsevier, vol. 79(C).
    16. Joseph I. Daniel, 2011. "Congestion pricing of Canadian airports," Canadian Journal of Economics, Canadian Economics Association, vol. 44(1), pages 290-324, February.
    17. Czerny, Achim I. & Zhang, Anming, 2014. "Airport peak-load pricing revisited: The case of peak and uniform tolls," Economics of Transportation, Elsevier, vol. 3(1), pages 90-101.
    18. Achim I. Czerny & Anming Zhang, 2010. "Airport Congestion Pricing and Passenger Types," WHU Working Paper Series - Economics Group 10-01, WHU - Otto Beisheim School of Management.
    19. Fu, Xiaowen & Lei, Zheng & Liu, Shaoxuan & Wang, Kun & Yan, Jia, 2020. "On-time performance policy in the Chinese aviation market - An innovation or disruption?," Transport Policy, Elsevier, vol. 95(C), pages 14-23.
    20. Hugo E. Silva & Robin Lindsey & André de Palma & Vincent A. C. van den Berg, 2017. "On the Existence and Uniqueness of Equilibrium in the Bottleneck Model with Atomic Users," Transportation Science, INFORMS, vol. 51(3), pages 863-881, August.

    More about this item

    Keywords

    Pigouvian taxes; Congestion tolls;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:irv:wpaper:080915. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Melissa Valdez (email available below). General contact details of provider: https://edirc.repec.org/data/deucius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.