2.2.3. The road charge
What is the effect of the road charge, t, keeping constant city
population n and per-capita income, yþO?
Proposition 3. A road charge on the suburban commuters, but
without redistributing the road charge revenue, reduces suburban
population, increasing the core’s population and the rent in the core,
decreasing the equilibrium utility.
Proof. In Section A.3 of the Appendix A. &
Under the redistribution of the higher rent surplus and/or the
aggregate toll revenue, a higher road charge initially increases the
level of utility. We will see this result in the course of treating the
optimal road charge policy in the sequel.