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The Price of Silence: Markets for Noise Licenses and Airports

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  • Thierry Brechet
  • Pierre M. Picard

    () (CREA, University of Luxembourg)

Abstract

This paper presents a market design for the management of noise pol- lution created by aircraft tra¢ c around airports. A local market for noise licenses allows noise generators to compensate noise victims. We show that the market allows the market designer to achieve his/her optimal allocation of flights provided that he/she does not over-weight the benefit of economic activity compared to the disutility of noise pollution. The fact that local rep- resentatives of noise victims may be strategic players does not fundamentally alter this finding. Because of the market auctioneer's information constraints, noise licenses are likely to distribute windfall gains to residents, which alter the urban structure in the long run.

Suggested Citation

  • Thierry Brechet & Pierre M. Picard, 2008. "The Price of Silence: Markets for Noise Licenses and Airports," CREA Discussion Paper Series 08-08, Center for Research in Economic Analysis, University of Luxembourg.
  • Handle: RePEc:luc:wpaper:08-08
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    References listed on IDEAS

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    1. Juan-Pablo Montero, 2008. "A Simple Auction Mechanism for the Optimal Allocation of the Commons," American Economic Review, American Economic Association, vol. 98(1), pages 496-518, March.
    2. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    3. Jan K. Brueckner, 2003. "Airline Traffic and Urban Economic Development," Urban Studies, Urban Studies Journal Limited, vol. 40(8), pages 1455-1469, July.
    4. Morrison, Steven A & Winston, Clifford & Watson, Tara, 1999. "Fundamental Flaws of Social Regulation: The Case of Airplane Noise," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 723-743, October.
    5. Schipper, Youdi, 2004. "Environmental costs in European aviation," Transport Policy, Elsevier, vol. 11(2), pages 141-154, April.
    6. A. Ellerman, 2005. "A Note on Tradeable Permits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 31(2), pages 123-131, June.
    7. Jon P. Nelson, 2004. "Meta-Analysis of Airport Noise and Hedonic Property Values," Journal of Transport Economics and Policy, University of Bath, vol. 38(1), pages 1-27, January.
    8. Andrea Baranzini & José V. Ramirez, 2005. "Paying for Quietness: The Impact of Noise on Geneva Rents," Urban Studies, Urban Studies Journal Limited, vol. 42(4), pages 633-646, April.
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    Cited by:

    1. Akyol, Metin & Neugart, Michael & Pichler, Stefan, 2015. "A tradable employment quota," Labour Economics, Elsevier, vol. 36(C), pages 48-63.
    2. BRECHET, Thierry & PICARD, Pierre M., 2010. "The economics of airport noise: how to manage markets for noise licenses," CORE Discussion Papers 2010086, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Thierry Bréchet & Pierre M. Picard, 2010. "The Economics of Airport Noise: Managing Markets for Noise Licenses," CREA Discussion Paper Series 10-13, Center for Research in Economic Analysis, University of Luxembourg.

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