 Regulation of road accident externalities when insurance companies have market powerMaria Dementyeva, Paul Koster and Erik Verhoef Journal of Urban Economics, 2015, vol. 86, issue C, 1-8 Abstract: Accident externalities that individual drivers impose on one another via their presence on the road are among the most important external costs of road transport. We study the regulation of these externalities when insurance companies have market power. Some of the results we derive have close resemblance to the earlier literature on externality regulation with market power in aviation and private roads, but there are important differences, too. Using analytical models, we compare the first-best public welfare-maximizing outcome with a private profit-maximizing monopoly, and oligopoly. We find that insurance companies will internalize some of the externalities, depending on their degree of market power. We derive optimal insurance premiums, and regular parametric taxes as well as “manipulable” ones that make the companies set socially optimal premiums. The latter take into account that the firm tries to exploit knowledge of the tax rule applied by the government. Finally, we also study the taxation of road users rather than that of firms. Keywords: Accident externalities; Traffic regulation; Safety; Second-best; Market power (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:86:y:2015:i:c:p:1-8 DOI: 10.1016/j.jue.2014.11.001 Access Statistics for this article Journal of Urban Economics is currently edited by S.S. Rosenthal and W.C. Strange More articles in Journal of Urban Economics from Elsevier |
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