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Private financing of roads and optimal pricing: Is it possible to get both?

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  • Ginés de Rus

    ()

  • Manuel Romero

Abstract

Road pricing has been defended by economists as a useful instrument to internalize the costs that road users impose upon other users and the rest of society, with the aim of allocating scarce space and to reduce congestion to an efficient level. More recently, private participation in the construction, maintenance and operation of road infrastructure has been growing all over the world to face the challenge of tight budget constraints and increasing demand for additional road capacity. Fixed term concessions have been the standard contract between the public sector and private operators. Demand uncertainty and fixed term contracts have made impossible to fulfill the concession agreement in many cases, and contract renegotiation has been used to restore financial equilibrium. This has some undesirable economic consequences: selecting the most efficient concessionaire is not longer guaranteed and prices lose their role as signals for allocative efficiency. This paper addresses the problem of giving that role back to pricing, analyzing the possibility of achieving efficient pricing and cost recovery without contract renegotiation. Copyright Springer-Verlag 2004

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File URL: http://hdl.handle.net/10.1007/s00168-003-0177-2
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Bibliographic Info

Article provided by Springer in its journal The Annals of Regional Science.

Volume (Year): 38 (2004)
Issue (Month): 3 (09)
Pages: 485-497

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Handle: RePEc:spr:anresc:v:38:y:2004:i:3:p:485-497

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Keywords: D4; H4; L9; R4;

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Cited by:
  1. Albalate, Daniel & Bel, Germà, 2009. "Regulating concessions of toll motorways: An empirical study on fixed vs. variable term contracts," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(2), pages 219-229, February.
  2. 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.
  3. Hoffman, Karla & Berardino, Frank & Hunter, George, 2013. "Congestion pricing applications to manage high temporal demand for public services and their relevance to air space management," Transport Policy, Elsevier, vol. 28(C), pages 28-41.

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