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The Price of Silence: Tradeable Noise Permits and Airports

CORE Discussion Paper No. 2007/45

37 Pages Posted: 29 Aug 2007  

Thierry Bréchet

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Pierre M. Picard

Centre de Recherche en Économie Appliquée (CREA); Universite du Luxembourg

Date Written: July 2007

Abstract

This paper presents a market design for the management of noise disturbance created by aircraft traffic around large airports. A market for tradable noise permits allows noise generators to compensate harmed residents. We show that the noise permit markets allow the achievement of the planner's optimal allocation of flights provided that she/he does not over-weight the benefit of economic activity compared to the disutility of noise disturbances. The fact that zones are likely to be strategic players does not fundamentally alter this finding. Because of the market auctioneer's information constraints, noise permits are likely to redistribute windfall gains to residents located in non-critical zones. This entices landlords to increase their land/house rents there and to design smaller houses in the long run.

Suggested Citation

Bréchet, Thierry and Picard, Pierre M., The Price of Silence: Tradeable Noise Permits and Airports (July 2007). Available at SSRN: https://ssrn.com/abstract=1010621 or http://dx.doi.org/10.2139/ssrn.1010621

Thierry Brechet (Contact Author)

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

Pierre M. Picard

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

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