The Ramsey Problem for Congestible Facilities

Richard Arnott and Marvin Kraus

No 84, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: In recent years, a new set of models drawing on Vickrey [1969] has been developed to analyze the economics of congestible facilities. These models are structural in that they derive the cost function from consumers' time-of-use decisions and the congestion technology. Standard models, in contrast, simply assume the general form of the cost function. We apply the new approach to analyze the Ramsey problem for a congestible facility, and show that the solution generally entails cost inefficiency. Standard models have failed to reveal this result because they treat the cost function as completely determined by technology.

Date: 1994-05
Note: PE
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Published as Journal of Public Economics, Vol. 50 (1993) pp. 371-396

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