NATIONAL BUREAU OF ECONOMIC RESEARCH
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The Ramsey Problem for Congestible Facilities

Richard Arnott, Marvin Kraus

NBER Technical Working Paper No. 84
Issued in May 1994
NBER Program(s):Public Economics Program

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.

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Document Object Identifier (DOI): 10.3386/t0084

Published: Journal of Public Economics, Vol. 50 (1993) pp. 371-396

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