The European Road Pricing Game: How to Enforce Optimal Pricing in High-Transit Countries Under Asymmetric Information
Saskia Van Der Loo
Katholieke Universiteit Leuven. KUL. Faculty of Business and Economics
KU Leuven - Department of Economics
September 27, 2011
A federal government tries to force local governments to implement welfare optimal tolling and investment. Welfare optimal tolling requires charging for marginal external costs. Local governments have an incentive to charge more than the marginal social cost whenever there is transit traffic. We analyze the pricing and investment issue in an asymmetric information setting where the local governments have better information than the federal government. The case of air pollution and of congestion are discussed.
Number of Pages in PDF File: 33
Keywords: road pricing, federalism, asymmetric information, implementation congestion pricing
Date posted: March 27, 2012
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