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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jue.2007.01.001 Byline: B. De Borger (a), F. Dunkerley (b), S. Proost (b)(c) Keywords: Congestion pricing; Transport investment; Transit traffic Abstract: This paper studies pricing and investment decisions on a congested transport corridor where the elements of the corridor are controlled by different governments. A corridor can be an interstate highway or railway line, or an inter-modal connection. We model the simplest corridor: two transport links in series, where each of the links is controlled by a different government. Each link is used by transit as well as by local traffic; both links are subject to congestion. We consider a two-stage non-cooperative game where both governments strategically set capacity in the first stage and play a pricing game in the second stage. Three pricing regimes are distinguished: (i) differentiated tolls between local and transit transport, (ii) one uniform toll on local and transit traffic, and (iii) only the local users can be tolled. Numerical analysis illustrates all theoretical insights. A number of interesting results are obtained. First, transit tolls on the network will be inefficiently high. If only local traffic can be tolled, however, the Nash equilibrium tolls are inefficiently low. Second, raising the toll on transit through a given country by one euro raises the toll on the whole trajectory by less than one euro. Third, higher capacity investment in a given region not only reduces optimal tolls in this region under all pricing regimes but it also increases the transit tolls on the other link of the corridor. Fourth, capacities in the different regions are strategic complements: when one country on the corridor increases transport capacity, it forces the other country to do the same. Finally, if transit is sufficiently important, it may be welfare improving not to allow any tolling at all, or to only allow the tolling of locals. If countries can toll transit, capacity and toll competition would lead to insufficient investment and strong tax exporting behavior, so that welfare is actually higher in the absence of any tolling at all. Author Affiliation: (a) Department of Economics, University of Antwerp, Prinsstraat 13, B-2000 Antwerp, Belgium (b) Department of Economics, Catholic University of Leuven, Naamsestraat 69, B-3000 Leuven, Belgium (c) CORE, 1348, Louvain-La-Neuve, Belgium Article History: Received 30 March 2006; Revised 16 January 2007

This paper analyzes the optimal urban congestion toll in a second-best setting where only one road in a network can be tolled. Both heterogeneity in labor productivity and income distribution concerns are considered. The optimal toll balances two types of considerations. The first consideration is the correction of the congestion externality on the tolled road given the distortion on the non-tolled roads, while the second is the equity consideration that takes into account which income group uses the tolled road and how toll revenues are spent. Both separating and pooling equilibria are analyzed for two alternative uses of toll revenues: poll transfers and labor-tax cuts. Using numerical simulations, we show that equity concerns can lead a government to prefer inefficient toll levels and recycling via poll transfers rather than via labor tax reductions. [ABSTRACT FROM AUTHOR]

In this paper, we analyse the gap between present transport prices and efficient transport prices. Efficient transport prices are those prices that maximise economic welfare, including external costs (congestion, air pollution, accidents). The methodology is applied to six urban and interregional case studies using one common optimal pricing model. The case studies cover passenger as well as freight transport and cover all modes. We find that prices need to be raised most for peak urban passenger car transport and to a lesser extent for interregional road transport. Optimal pricing results for public transport are more mixed. We show that current external costs on congested roads are a bad guide for optimal taxes and tolls: the optimal toll that takes into account the reaction of demand is often less than one third of the present marginal external cost. [Copyright &y& Elsevier]

Highlights: [•] Non cooperative regulators of departure and arrival airports generate too high airport charges. [•] The airport taxes can be a more important market distortion than imperfect competition on intercontinental routes. [•] It is in the interest of each continent to limit the number of regulators. [•] Multiple regulators on one continent or a simple pricing rule limit the welfare loss of strategic airport regulation. [•] Non-cooperative regulators of departure and arrival airports underestimate the full costs of air traffic regulations. [Copyright &y& Elsevier]