Congestion Externalities

Abstract

The phenomenon of congestion can be observed on the markets for network services (level 1) as well as on the markets for infrastructure capacities (levels 2 and 3). Congestion externalities can be involved in the use of any transportation infrastructures, such as airports, railway tracks, ports and roads. The field that has been studied most intensively in the literature of transport economics is road congestion externalities. Therefore, in this chapter we will in particular examine the congestion problem on motorways. A special type of network externalities is to be found in electricity transmission networks. Because of certain laws of physics (Ohm's Law, Kirchhoff's Laws), electricity transmission is not confined to a specific path. As a result of the physical and technological characteristics of electricity transmission, system network externalities are of central importance in the electricity sector.