Congested Roads and General Equilibrium Pigouvian Tax Solutions
In this paper we use Pigouvian taxation theory to solve network congestion problems in a general equilibrium framework. In network congestion problems, the cost of using the network increases as a function of the total flow on the network. The present problems on our roads and airports are the best illustrations of such disequilibria between the demand for transportation services and the available capacity. Congestion problems also occur in other public facilities like telephone networks, swimming pools, etc. where the quality of services decreases when the total level of demand is in disproportion to the available capacity. We will however concentrate on the road transport example.
KeywordsCongestion Externality Externality Term Marginal External Cost Marginal Welfare Cost Network Congestion Problem
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