Private Roads: Auctions and Competition in Networks

This paper studies the impact that private roads have on the efficiency of unpriced networks. The authors allow for capacity and toll choice by private operators, and endogenize entry and therewith the degree of competition, allowing for both parallel and serial competition. Two schemes are studied, one where entry is free and one where it is won at auction. A number of assumptions are made to keep the analysis manageable and to keep the model transparent. Primarily, the only relevant market failure is congestion. Road users are identical, as are the cost functions for the firms providing road capacity. Economies of scale in road construction are neutral, and congestion technology exhibits returns to scale. Auctions are perfectly competitive. The network configuration is simple, with a single market for trips between one origin and one destination, and a road corridor consisting of two serial segments connected through a non-congested crossing. The free-entry regime has an assumed game-theoretic set-up, for which it is assumed that operators are free to add capacity to the network and to set tolls. For the auction regime, the paper assumes that the right to build a single tolled link on either segment is awarded to the firm that makes the best offer. Another set of entries are the “second-best zero-profit entries,” which are described. The relative performances of the three regimes are calculated using a numerical simulation model. Some results stand out: as more firms enter, the tolls are driven closer to socially optimal levels, despite the existence of serial competition. Both the free-entry regime and the auctions regime have the second-best zero-profit equilibrium as the end-state of the equilibrium sequence of investments.

• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/oclc/856156
• Authors:
  • Verhoef, Erik T
• Publication Date: 2008-9

Language

• English

Media Info

• Media Type: Print
• Features: Figures; References; Tables;
• Pagination: pp 463-493
• Serial:
  • Journal of Transport Economics and Policy
  • Volume: 42
  • Issue Number: 3
  • Publisher: University of Bath
  • ISSN: 0022-5258
  • Serial URL: http://www.jtep.com

Subject/Index Terms

• TRT Terms: Equilibrium (Economics); Equilibrium (Systems); Game theory; Network analysis (Planning); Private roads; Toll roads
• Subject Areas: Economics; Highways; I10: Economics and Administration; I72: Traffic and Transport Planning;

Filing Info

• Accession Number: 01115685
• Record Type: Publication
• Source Agency: UC Berkeley Transportation Library
• Files: BTRIS, TRIS, ATRI
• Created Date: Nov 29 2008 8:07AM