Logo Logo

London's Congestion Charge

Abstract

The case describes the events leading up to the imposition of the London congestion charge. Views about the congestion charge, both pro and con, are presented. The case also discusses, in general terms, the economics of traffic congestion, pointing out that an unregulated market for driving will not reach the social optimum. The case contains sufficient data for students to estimate the deadweight loss in an unregulated market. Students can also estimate the reduction of the deadweight loss due to the imposition of the congestion charge in 2003. The case provides a good illustration of how an unregulated market with negative externalities can lead to an overprovision of a good (in this case driving). It also shows how an externality tax (in this case, London's congestion charge) can lead to an improvement in social welfare.

Type

Case

Author(s)

David Besanko, Johannes Horner

Date Published

Citations

Besanko, David, and Johannes Horner. London's Congestion Charge. Case 5-206-257 (KEL193).

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more