A Toll Road with Heterogeneous Users and Elastic Demand

Private provision of public roads as a way to finance modern road systems is increasing around the world. One important issue regarding a private toll road is how the profit-oriented behaviors of the private firm may deviate from the socially optimal outcome. Under the assumption of homogeneous road users with elastic demand, a classic result is that the private firm would always like to charge a toll higher than the socially optimal level. Thus the government should set a toll level ceiling to avoid too much welfare loss. In this paper, however, the authors show that when road users are heterogeneous in value of time (VOT), the private firm may prefer a toll lower than the socially optimal level. We adopt an analytical approach in our analysis and establish an explicit condition under which this will happen. The authors also make comparisons between the profit-maximizing and the welfare-maximizing capacity levels and volume/capacity ratios. Self-financing analysis in this heterogeneous user environment is also conducted.

• Corporate Authors:

  Transportation Research Board

  500 Fifth Street, NW
  Washington, DC  United States  20001
• Authors:
  • Guo, Xiaolei
  • Yang, Hai
  • Liu, Henry X
• Conference:
  • Transportation Research Board 89th Annual Meeting
  • Location: Washington DC, United States
  • Date: 2010-1-10 to 2010-1-14
• Date: 2010

Language

• English

Media Info

• Media Type: DVD
• Features: References;
• Pagination: 22p
• Monograph Title: TRB 89th Annual Meeting Compendium of Papers DVD

Subject/Index Terms

• TRT Terms: Financing; Highway capacity; Profits; Toll roads; Tolls; Traffic volume; Travel surveys; Value of time; Welfare economics
• Uncontrolled Terms: Elastic demand
• Subject Areas: Finance; Highways; Planning and Forecasting; I72: Traffic and Transport Planning;

Filing Info

• Accession Number: 01155480
• Record Type: Publication
• Report/Paper Numbers: 10-3766
• Files: TRIS, TRB
• Created Date: Apr 26 2010 7:14AM