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TITLE:
Congestion Tolling with Agglomeration Externalities

AUTHOR(S):
Richard Arnott, Boston College

DOCUMENT TYPE: Article

ABSTRACT:
Consider an urban economy with two types of externalities, negative traffic congestion externalities and positive agglomeration externalities deriving from non-market interaction. Suppose that urban travel can be tolled, that non-market interaction cannot be subsidized, and that non-market interaction is stimulated by a reduction in travel costs. Then the optimal toll is below the congestion externality cost. This paper explores this line of reasoning.