Internalisation of Transport Noise Externalities: Activity Disturbance Pricing and Implementation

Abstract

A transport noise-pricing model is developed, which distinguishes between transport sound externalities, real resource costs of transport noise externalities and monetary valuations of such costs. It differs from existing approaches (hedonic pricing and contingent valuation), which aim at monetary valuations directly. The internalisation of transport noise externalities is modelled at the micro-level and allows aggregation across a population to any desired extent. A transport noise externality is characterised for every individual as a set of maps from the space of (non-marketable) transport sound commodities into the set of feasible actions (marketable and non-marketable human activities) such that the set of feasible actions is reduced. The concept of real resource costs to an individual corresponds to the duration of disturbances of optimally chosen human activities and is measured in units of time. Monetary valuations of such costs only require positive personal incomes, irrespective of their source. One example is given of applying a dominant strategy mechanism (Mookherjee and Reichelstein) to the solution of the model, assuming the objective is to select transport service productions which maximise economic profit, appropriate noise measurement technology exists to allow the identification of transport sound sources, and ‘polluter pays’ legislation exists which is costless to enforce.Internalisation of transport noise externalities, incomplete markets, incentive compatible mechanism