Traffic Congestion As Market Failure Essay Research

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Traffic Congestion As Market Failure Essay, Research Paper ??????????? Congestion comes about when the actual journey times taken by transport users are in excess of their normal expectations. Congestion can have many consequences other than increased journey time, the stress caused by it can be the cause of road rage, as well as the increase in harmful emissions having detrimental effects to the areas buildings, air quality and quality of life of all involved. ??????????? Congestion more simply is caused by too many cars chasing too little road space. The demand for this mode of transport has far exceeded the supply. The increase in incomes and relative fall in the price for cars has led to the higher number of cars on the road. The supply for road use is fixed in the short

run as it cannot be transferred; the roads are not constantly congested, it is only during peak times, the empty roads of the night and day cannot be transferred to the busy periods of morning and tea-time. In the long run another road could be built. In more economic terms congestion is a mixture of externalities, information failure and transaction cost. Negative externalities exist as the car produces emissions, which are harmful to the environment, the wear and tear of the roads, and the opportunity costs are not included in the monetary costs of motoring. They are also mutual externalities as the drivers are both the cause of the congestion; the victim of those in fronts decision to drive and the cause to those behind. Information failure is apparent as if information of

delays and congestion could be relayed, alternative routes could be taken and congestion reduced. However the market does not give such signals, this could never be a perfect solution, as the congestion would eventually transfer to the alternative route, an alternative may not always be available anyway.? The transaction cost can not be possible in road use as a market solution of using price to allocate road space is not practical because you can not pay the person in front of you in a traffic queue for their space. The administrative solution of first come first served is used. Transaction costs could be done in the form of tolls, but these have impracticalities. Congestion in urban areas can be seen as a form of market failure because the socially efficient output is not

produced. The social optimum amount of vehicles on the road must be exceeded if congestion results. The marginal cost to the consumer is the only cost really considered when a driver makes the decision to use the car. What is not taken into account are the costs to other road users, the cost to society collectively; the social cost or themselves to some extent. The marginal cost to other road users is the added congestion caused by the extra car on the road. The marginal costs to society collectively are the increase in emissions produced by the extra journey made, the follow on effects from this are large, rising asthma levels in the local area, decaying buildings and collapsing roads could be caused because of the high congestion rates. The marginal cost to the individual could

be the opportunity cost of the time spent in congestion. If the more space efficient bus made the journey, the traveller would be able to read the newspaper, play on a hand held computer or even do some work, this is not possible if the car is chosen to make the journey. The marginal utility of existing users of the congested roads would decrease with the addition of an extra motorist, an extra 10 or even 100 motorists would lower the marginal utility levels dramatically. But each individuals marginal cost wouldn?t be effected, which explains why the marginal cost and marginal social cost diverge. This can be shown by the graph that shows the social optimum level of vehicles; where the marginal social cost equals the marginal social benefit. Journey Costs & benefits