To the top

Page Manager: Webmaster
Last update: 9/11/2012 3:13 PM

Tell a friend about this page
Print version

Cost recovery of congeste… - University of Gothenburg, Sweden Till startsida
To content Read more about how we use cookies on

Cost recovery of congested infrastructure under market power

Journal article
Authors Erik T. Verhoef
Published in Journal of Urban Economics
Volume 101
Pages 45-56
ISSN 0094-1190
Publication year 2017
Published at Department of Economy and Society
Pages 45-56
Language en
Keywords Congestion pricing, Capacity choice, Self-financing infrastructure, Market power, Airport congestion, public-goods, airport congestion, private provision, tax competition, capacity, investment, carriers, tolls, Business & Economics, Urban Studies
Subject categories Economics and Business


The Mohring-Harwitz (1962) theorem states that the degree of self-financing of congested infrastructure is equal to the elasticity of the capacity cost function in the optimum, so that under neutral scale economies exact self-financing applies. The theorem breaks down when the infrastructure is used by operators with market power, the case in point often being airlines at a congested airport. This paper proposes a regulatory scheme that restores self-financing in such cases; partially so in general, and perfectly so under specific circumstances that include (1) the satisfaction of a particular proportionality condition, and (2) either the isolation of budgets needed for subsidies to counter demand-related mark-ups, or perfectly elastic demands so that such mark-ups are zero. Moreover, exact self-financing applies in this scheme independent of the elasticity of the capacity cost function, and occurs for both parametric and "manipulable" congestion pricing. (C) 2017 Elsevier Inc. All rights reserved.

Page Manager: Webmaster|Last update: 9/11/2012

The University of Gothenburg uses cookies to provide you with the best possible user experience. By continuing on this website, you approve of our use of cookies.  What are cookies?