Chapter 3: Transport pricing beyond the social optimum
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This chapter reviews the theory of transport pricing under different objectives than the textbook references of first-best optimization of social welfare. We will discuss pricing for profit maximization, pricing by multiple governments, and - albeit briefly - price incentives that are constrained to be positive or budget neutral. Although different objectives naturally lead to different pricing rules, there remain strong conceptual links with insights from the theory of first-best pricing. For example, a profit-maximizing operator has an incentive to internalize congestion externalities, while an extensive example of tax competition produces pricing rules that balance elements from surplus maximizing and profit-maximizing pricing.

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