Effects of Gateway Congestion Pricing on Optimal Road Pricing and Hinterland

This paper investigates the effects of congestion pricing implemented at a gateway (port or airport) on its hinterland's optimal road pricing, road congestion and social welfare. We find that if the gateway maximises the joint profit of itself and its oligopoly carriers, its charge will rise, with part of this increase owing to congestion pricing. This increase in the gateway charge will lead to lower road tolls, independent of whether the road price discriminates between local and transit traffic (from or to the gateway). However, while the change in road congestion is in general ambiguous, the hinterland's welfare will fall as a result of the increase in the gateway charge. © 2008 LSE and the University of Bath