In the presence of price distortions, cost-benefit analysis must include changes in the deadweight loss in addition to the direct benefits and costs to transportation users and nonusers. Advances in new economic geography (NEG) have highlighted the importance of price distortions associated with...

This paper examines the agglomeration benefits of a transportation improvement in a city by modeling the microstructure of urban agglomeration based on monopolistic competition of differentiated intermediate products. Properly extended to include variety distortion in addition to price...