THE PRICE OF SILENCE: MARKETS FOR NOISE LICENSES AND AIRPORTS

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1468-2354.2010.00612.x Byline: Thierry Brechet ([dagger]), Pierre M. Picard (1) Abstract: This article presents a market design for the management of noise pollution created by aircraft traffic around airports. A local market for noise licenses allows noise generators to compensate noise victims and to meet social acceptability. We show that the market allows the market designer to implement the social planner's optimal allocation of flights as long as the latter does not put too high a weight in his/her objective function on firms' profits compared to the disutility of noise pollution. The fact that local representatives 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 alters the urban structure in the long run. Author Affiliation: ([dagger])Universite catholique de Louvain, CORE and Louvain School of Management, Chair Lhoist Berghmans in Environment Economics and Management, Belgium; University of Luxembourg, CREA, Universite catholique de Louvain, CORE, Belgium