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The Price Of Silence: Markets For Noise Licenses And Airports

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  • Thierry Bréchet
  • Pierre M. Picard

Abstract

This article presents a market design for the management of noise pollution created by aircraft traffic around airports. A local market for noise licenses allows noise generators to compensate noise victims and to meet social acceptability. We show that the market allows the market designer to implement the social planner's optimal allocation of flights as long as the latter does not put too high a weight in his/her objective function on firms' profits compared to the disutility of noise pollution. The fact that local representatives of noise victims may be strategic players does not fundamentally alter this finding. Because of the market auctioneer's information constraints, noise licenses are likely to distribute windfall gains to residents, which alters the urban structure in the long run.

Suggested Citation

  • Thierry Bréchet & Pierre M. Picard, 2010. "The Price Of Silence: Markets For Noise Licenses And Airports," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(4), pages 1097-1125, November.
    • Handle: RePEc:ier:iecrev:v:51:y:2010:i:4:p:1097-1125
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    File URL: http://hdl.handle.net/10.1111/j.1468-2354.2010.00612.x
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    References listed on IDEAS

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    1. Juan-Pablo Montero, 2008. "A Simple Auction Mechanism for the Optimal Allocation of the Commons," American Economic Review, American Economic Association, vol. 98(1), pages 496-518, March.
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    Cited by:

    1. Hong, Jimin & Seog, S. Hun, 2018. "Life insurance settlement and the monopolistic insurance market," Insurance: Mathematics and Economics, Elsevier, vol. 81(C), pages 36-50.
    2. BRECHET, Thierry & PICARD, Pierre M., 2010. "The economics of airport noise: how to manage markets for noise licenses," LIDAM Discussion Papers CORE 2010086, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Akyol, Metin & Neugart, Michael & Pichler, Stefan, 2015. "A tradable employment quota," Labour Economics, Elsevier, vol. 36(C), pages 48-63.
    4. Pierre M. Picard & Harris Selod, 2023. "Customary Land Conversion in African Cities," DEM Discussion Paper Series 23-09, Department of Economics at the University of Luxembourg.
    5. Thierry Bréchet & Pierre M. Picard, 2010. "The Economics of Airport Noise: Managing Markets for Noise Licenses," DEM Discussion Paper Series 10-13, Department of Economics at the University of Luxembourg.

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