Introducing marginal cost pricing in the London transport sector does not guarantee an efficient outcome when there are externalities or distortions in other (related) sectors in the economy, which are not priced according to marginal cost. Marginal cost pricing has proved difficult to implement in the UK. Such form of pricing would require highly differentiated pricing systems in time and space, which would be expensive to provide and confusing to drivers . From these factors, it is clear that first-best pricing is not very relevant from a practical perspective.A second-best charge can be defined as the optimal road charge when the true optimum (first best charge) is unavailable due to constraints on policy choice. The theory of second best says that a policy that would be optimal without such constraints may not be second-best optimal if other policies are constrained. Unfortunately, this also poses problems. In order to compute a second-best road charge, a fair amount of information is still required, including marginal congestion costs and the exact tax constraints .The problem of traffic congestion in London still remains and a solution is required. There is an externality that creates an imperfection in an already imperfect market. A similar problem arises with environmental pollution. We will look at the London Congestion Charging Scheme and its proposed extension as its test-example. We find that the welfare gains from a congestion charge depend crucially on the location. of where the charge applies and charge level and our results are only valid for the set of boundaries that have been proposed by Transport for London (TfL). If the model we use covered a different area, traffic flows and times savings would be different. The political economy of such decisions is not always guided by any efficiency principles, but rather by political forces and lobbies. The final result will be the combination of different pressure and political groups and this may or may
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In the paper “Road Pricing is Inefficient but Fair” the author analyzes the negative externality, which would generally require a corrective tax or charge in order to reduce congestion and hence, provides the standard argument for road pricing. He provides models of increasing sophistication…
This paper will discuss different economic approaches for Aslan communications’ price setting, and identify factors that may limit the firm’s choice in pricing decisions. The economic approaches consider elements such as demand, elasticity, cost, oligopolistic behaviour, market structure, product differentiation, and innovation management while setting price for a product.
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Many articles took into account the compelling case for the utilization of the mechanism as management for congestion as well as optimize congestion along with network investment. After 1990s, the countries began to implement the schemes of road charging.
There are encouraging trends in this sector and the future looks brighter.
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There are many factors that can be used to determine the price of a commodity which all depends on the most prevalent factor that is used in a marketing system. Price is the quantity payment that is given in exchange for something. Through this may have a different social meaning, it is used for monetary value in economics.
This charge was implemented to curb the road and traffic congestion by charging the amount of externality directly to vehicle who create these externalities. As a sign of traffic congestion in Central London, recent survey show that average speed of Vehicles on the main road in Central London has dropped from 14 mph to around 9 mph.
shall briefly elaborate in this paper – but is also at this point in time neither feasible nor acceptable, as a recent survey of public opinion in the U.K. showed (RAC, 2004, p. 9).
We begin with a brief discussion of transport supply and demand to explain how road space and
However, the main aim of road pricing is arguably for revenue collection used for road management, perhaps, to discourage use of certain roads during peak hours thereby reducing congestion. Road pricing had been a manual
3 pages (750 words)Essay
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