Date of Original Version

Summer 1968



Abstract or Description

One externality which has received little attention from economists is that connected with congestion (a recent treatment is Strotz, 1965). An increase in the utilization of a facility can result in longer waiting time or in a less appealing service. For example, an increased number of tows on a water- way can give rise to greater delays at locks; a larger crowd at a beach can lead to a lower satisfaction for each "customer." The former case, which involves production, is particularly complex. Here, delay is caused either by the random arrival of customers or by a random service (production) rate. Serving tows at a lock is analogous to serving shoppers at a super- market checkout stand. Similar problems occur with respect to allocating docking facilities in a port, runways and terminals in an airport, land to streets in an industrial park, and machines in a job shop



Published In

Journal of Political Economy , 76, 3, 375-391.