Operationalisation of Marginal Cost Pricing within Urban Transport
Esko Niskanen and
Erik Verhoef ()
No 63, Research Reports from VATT Institute for Economic Research
Charges and taxes for transport have traditionally had little connection to costs, instead being part of broader fiscal policies of raising revenue or directly promoting other goals, industrial, social and environmental. The gap between the costs and actual charges is particularly evident in urban road transport where current pricing mechanisms typically make little or no attempt to reflect concentrations of transport activity in time and space and hence of transport induced costs. Economic theory shows that, under the market approach, marginal cost pricing is a condition for economic efficiency. Still, a huge gap exists between the lessons of economic theory and the possibilities of current technology on one hand, and the achievements in implementing marginal cost pricing thus far in practice on the other. In relation to the broader socio-economic context of marginal social cost pricing, determined by various technological, institutional, legal and political constraints, this report highlights three important aspects or distinctions: the distinction between policy situations with different coverage, the distinction between first-best and second-best situations, and the need for policy packaging.
Keywords: Urban transport, marginal cost pricing, first-best, second-best, Transport, Liikenne, Labor market and policies promoting economic growth, Työmarkkinat ja kasvua tukeva politiikka, C100 - Econometric and Statistical Methods: General, R480 - Transportation Systems: Government Pricing; Regulatory Policies, (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fer:resrep:63
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Research Reports from VATT Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Anita Niskanen ().