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| Author: | Verhoef, E.T. |
| Title: | Private roads: auctions and competitions in networks |
| Journal: | Journal of Transport Economics and Policy
2008 : SEP, VOL 42:3 p.463-494 |
| Index terms: | transport economics roads entry conditions auctions social welfare |
| Freeterms: | tolls |
| Language: | eng |
| Abstract: | This research studies the efficiency effects of private toll roads in initially untolled networks. The analysis allows for capacity and toll chosen by private operators, and makes entry and therewith the degree of competition endogenous, distinguishing and permitting for both parallel and serial competition. Two institutional arrangements are debated: one in which entry is free and one in which it is allowed after winning an auction which maximizes patronage. Both schemes have the second-best zero-profit equilibrium as the end-state of the equilibrium sequence of investments; however, the auctions scheme approaches this end-state more rapidly: tolls settle equal to their second-best zero-profit levels immediately, and bigger capacity additions for the earlier investments are achieved. When discreteness of capacity is relevant and limits the number of investments able to be accommodated practically, the auctions scheme may therefore still lead to a more efficient end-state, with a higher social surplus, although the theoretical end-state being same as under free entry. |
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