External Effects in Road Traffic: the Pigou-Knight Model and its Extension to Situations With Endogenous Speed Choice and Heterogeneous Traffic

Jan Rouwendal

Chapter 3 in Regional Externalities, 2007, pp 47-69 from Springer

Abstract: Abstract Traffic congestion is an important example of an external effect. Economic analysis of this phenomenon dates back to the first half of the twentieth century with the seminal contributions of Pigou and Knight. The Pigou-Knight model still remains an important tool for the analysis of congestion. It is the purpose of this contribution to provide a brief discussion of this canonical model and to introduce two extensions. The first concerns the derivation of the travel cost curve, which is considered as an exogenously given relationship in the standard analysis, from a theory about speed choice. The second concerns the incorporation of heterogeneous traffic into the model. The results of the analysis are illustrated by a numerical example.

Keywords: External effects; Traffic congestion; Pigou-Knight model (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-35484-0_3

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DOI: 10.1007/978-3-540-35484-0_3

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