Second-best congestion pricing schemes in the monocentric city

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Abstract

This 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 analysed 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. © 2005 Elsevier Inc. All rights reserved.
Original languageEnglish
Pages (from-to)367-388
Number of pages21
JournalJournal of Urban Economics
Volume58
Issue number3
DOIs
Publication statusPublished - 2005

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