Be r ke l e y (W CTR 2007) a nd Le uve n. Opi ni ons s t a t e d i n t hi s pa pe r a r e pe r s ona l a nd not t hos e of t he or ga ni z a t i ons me nt i one d i n t he t hi r d a ut hor ' s a f f i l i a t i on. 1 To focus on a few well defined aspects of the interaction port-hinterland, we ignore many real-world complications, like the behavior of private operators within ports, the structure of the shipping industry, supply chain considerations, etc. Introducing them into the current model would not affect the main lessons derived from the paper but would strongly complicate the technical analysis. 2 Similar examples of competing ports with congested hinterlands include ports on the West Coast of the U.S., Mexican and U.S. ports in the Gulf of Mexico, etc. The interaction between the ports of Los Angeles and Long Beach in California is a variation on the theme developed here, in the sense that these ports share the same congestible hinterland.
In this paper, we take a political economy approach to study the introduction of urban congestion tolls, using a simple majority voting model. Making users pay for external congestion costs is for an economist an obvious reform, but successful introductions of externality pricing in transport are rare. The two exceptions are London and Stockholm that are characterized by two salient facts. First, the toll revenues were tied to improvements of public transport. Second, although a majority was against road pricing before it was actually introduced, a majority was in favor of the policy reform after its introduction. This paper constructs a model to explain these two aspects. Using a stylized model with car and public transport, we show that it is easier to obtain a majority when the toll revenues are used to subsidize public transport than when they are used for a tax refund. Furthermore, introducing idiosyncratic uncertainty for car substitution costs, we can explain the presence of a majority that is ex ante against road pricing and ex post in favor. The ex ante majority against road pricing also implies that there is no majority for organizing an experiment that would take away the individual uncertainty.
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