Second-best congestion pricing schemes in the monocentric city

Erik T. Verhoef

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 analyzed 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.

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Year of publication:	2004
Authors:	Verhoef, Erik T.
Publisher:	Rotterdam [u.a.] : Tinbergen Inst.
Subject:	Traffic congestion \| second-best pricing \| urban structure \| spatial general equilibrium \| Verkehrsstau \| Maut \| Road pricing \| Theorie \| Theory \| Second Best \| Second best \| Stadtverkehr \| Urban transport \| Allgemeines Gleichgewicht \| General equilibrium \| Räumliches Gleichgewichtsmodell \| Spatial equilibrium model