The Price of Silence: Tradeable Noise Permits and Airports
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
CORE Discussion Paper No. 2007/45
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.
Number of Pages in PDF File: 37
Date posted: August 29, 2007