Competition and efficiency of private toll roads
AbstractAs the provision of roads has become market driven, many intriguing issues have emerged, such as the strategic interactions among private firms in determining road supply and pricing in a network and, more importantly, the resulting inefficiencies when competition substitutes for government regulation. This paper studies both toll and capacity competition among private asymmetric roads with congestion in a network with parallel links. We find that oligopolistic competition yields higher tolls but lower construction capacities than the socially optimal levels and, as a result, the level of traffic congestion does not decline. Based on some widely used assumptions, we show that the usage or the congestion level of each road controlled by each private firm, represented by the volume-capacity (v/c) ratio, is independent of the other competitors' choices of capacities and tolls in the oligopolistic market. To quantify the inefficiency of the oligopolistic equilibria via higher tolls and less realized traffic demand, we establish the upper bound of the ratio of the social welfare between the competitive equilibrium and the social optimum. The inefficiency bound depends mainly on the marginal benefit of trip-makers and the realized traffic demand at equilibrium on the private roads. Exact bounds are given by considering both the worst and symmetric cases. Naturally, our results show that the distortion disappears when the oligopoly changes to perfect competition.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Transportation Research Part B: Methodological.
Volume (Year): 41 (2007)
Issue (Month): 3 (March)
Contact details of provider:
Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/548/description#description
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eduardo Engel & Ronald Fischer & Alexander Galetovic, 1999.
"Toll Competition Among Congested Roads,"
NBER Technical Working Papers
0239, National Bureau of Economic Research, Inc.
- De Vany, Arthur & Saving, Thomas R, 1980. "Competition and Highway Pricing for Stochastic Traffic," The Journal of Business, University of Chicago Press, vol. 53(1), pages 45-60, January.
- Erik Teodoor Verhoef & Jan Rouwendal, 2003.
"Pricing, Capacity Choice and Financing in Transportation Networks,"
ERSA conference papers
ersa03p41, European Regional Science Association.
- Erik T. Verhoef & Jan Rouwendal, 2004. "Pricing, Capacity Choice, and Financing in Transportation Networks," Journal of Regional Science, Wiley Blackwell, vol. 44(3), pages 405-435.
- Erik T. Verhoef & Jan Rouwendal, 2003. "Pricing, Capacity Choice and Financing in Transportation Networks," Tinbergen Institute Discussion Papers 03-027/3, Tinbergen Institute.
- Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
- de Palma, Andre & Lindsey, Robin, 2002. "Private roads, competition, and incentives to adopt time-based congestion tolling," Journal of Urban Economics, Elsevier, vol. 52(2), pages 217-241, September.
- de Palma, Andre, 1992. "A Game-Theoretic Approach to the Analysis of Simple Congested Networks," American Economic Review, American Economic Association, vol. 82(2), pages 494-500, May.
- Yang, Hai & Meng, Qiang, 2000. "Highway pricing and capacity choice in a road network under a build-operate-transfer scheme," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(3), pages 207-222, April.
- Yang, Hai & Tang, Wilson H. & Man Cheung, Wing & Meng, Qiang, 2002. "Profitability and welfare gain of private toll roads in a network with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(6), pages 537-554, July.
- Daron Acemoglu & Asuman Ozdaglar, 2005.
"Competition and Efficiency in Congested Markets,"
NBER Working Papers
11201, National Bureau of Economic Research, Inc.
- De Borger, Bruno & Van Dender, Kurt, 2005.
"Prices, capacities and service quality in a congestible Bertrand duopoly,"
University of California Transportation Center, Working Papers
qt1k51437c, University of California Transportation Center.
- Bruno De Borger & Kurt Van Dender, 2005. "Prices, capacities and service quality in a congestible Bertrand duopoly," ERSA conference papers ersa05p221, European Regional Science Association.
- van den Berg, Vincent A.C., 2012.
"Auctions for private congestible infrastructures,"
40103, University Library of Munich, Germany.
- Yang, Hai & Yang, Teng, 2011. "Equilibrium properties of taxi markets with search frictions," Transportation Research Part B: Methodological, Elsevier, vol. 45(4), pages 696-713, May.
- Vincent A.C. van den Berg & Erik T. Verhoef, 2011. "Is the Service Quality of Private Roads too Low, too High, or just Right when Firms compete Stackelberg in Capacity?," Tinbergen Institute Discussion Papers 11-079/3, Tinbergen Institute, revised 02 Aug 2012.
- Wu, Di & Yin, Yafeng & Lawphongpanich, Siriphong, 2011. "Optimal selection of build–operate-transfer projects on transportation networks," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1699-1709.
- Wu, Di & Yin, Yafeng & Yang, Hai, 2011. "The independence of volume-capacity ratio of private toll roads in general networks," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 96-101, January.
- Tan, Zhijia & Yang, Hai, 2012. "Flexible build-operate-transfer contracts for road franchising under demand uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 46(10), pages 1419-1439.
- André de Palma & Robin Lindsey & Fang Wu, 2008.
"Private Operators and Time-of-Day Tolling on a Congested Road Network,"
Journal of Transport Economics and Policy,
London School of Economics and University of Bath, vol. 42(3), pages 397-433, September.
- André de Palma & Robin Lindsey & Fang Wu, 2007. "Private operators and time-of-day tolling on a congested road network," THEMA Working Papers 2007-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Vincent A.C. van den Berg, 2012. "Auctions for Private Congestible Infrastructures," Tinbergen Institute Discussion Papers 12-087/VIII, Tinbergen Institute, revised 19 Oct 2012.
- Yaron Hollander & Joseph Prashker, 2006. "The applicability of non-cooperative game theory in transport analysis," Transportation, Springer, vol. 33(5), pages 481-496, 09.
- Tan, Zhijia & Yang, Hai & Guo, Xiaolei, 2010. "Properties of Pareto-efficient contracts and regulations for road franchising," Transportation Research Part B: Methodological, Elsevier, vol. 44(4), pages 415-433, May.
- Vincent Van Den Berg, 2011. "The effect of private road supply on the volume/capacity ratio when firms compete Stackelberg in Road Capacity," ERSA conference papers ersa11p1203, European Regional Science Association.
- DE BORGER, Bruno & PROOST, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Working Papers 2012014, University of Antwerp, Faculty of Applied Economics.
- van den Berg, Vincent A.C. & Verhoef, Erik T., 2012. "Is the travel time of private roads too short, too long, or just right?," Transportation Research Part B: Methodological, Elsevier, vol. 46(8), pages 971-983.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.