Welfare effects of a transport subsidy in a spatial price equilibrium

Johannes Bröcker

No 3/98, Discussion Papers from Technische Universität Dresden, "Friedrich List" Faculty of Transport and Traffic Sciences, Institute of Transport and Economics

Abstract: The paper shows that in a spatial price equilibrium under monopolisitc competition welfare can be increased by subsidising transport. Therefore transport can be said to exert a positive (pecuniary) externality. This is demonstrated by introducing a subsidy into a partial spatial price equilibrium of the Hotelling-Smithies type in one-dimensional space. Two varieties of demand are analysed, linear and negative exponential. The welfare effect of a transport subsidy is shown to be decomposable into three effects, the expansion effect, the competition effect and the market size effect. Numerical results and decompositions are presented.

Keywords: transport; externality; spatial price equilibrium; welfare. (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tudiwv:398

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