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Private Roads: Auctions and Competition in Networks

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  • Erik T. Verhoef

Abstract

This paper studies the efficiency impacts of private toll roads in initially untolled networks. The analysis allows for capacity and toll choice by private operators, and endogenises entry and therewith the degree of competition, distinguishing and allowing for both parallel and serial competition. Two institutional arrangements are considered, namely one in which entry is free and one in which it is allowed only after winning an auction in which patronage is to be maximised. Both regimes have the second-best zero-profit equilibrium as the end-state of the equilibrium sequence of investments; but the auctions regime approaches this end-state more rapidly: tolls are set equal to their second-best zero-profit levels immediately, and capacity additions for the earlier investments are bigger. When discreteness of capacity is relevant and limits the number of investments that can be accommodated practically, the auctions regime may therefore still result in a more efficient end-state, with a higher social surplus, although the theoretical end-state is the same as under free entry. © 2008 LSE and the University of Bath

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Bibliographic Info

Article provided by London School of Economics and University of Bath in its journal Journal of Transport Economics and Policy.

Volume (Year): 42 (2008)
Issue (Month): 3 (September)
Pages: 463-493

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Handle: RePEc:tpe:jtecpo:v:42:y:2008:i:3:p:463-493

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Web page: http://www.bath.ac.uk/e-journals/jtep

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Cited by:
  1. van der Weijde, Adriaan Hendrik & Verhoef, Erik T. & van den Berg, Vincent A.C., 2013. "Competition in multi-modal transport networks: A dynamic approach," Transportation Research Part B: Methodological, Elsevier, vol. 53(C), pages 31-44.
  2. Adriaan Hendrik van der Weijde & Erik T. Verhoef & Vincent van den Berg, 2012. "Competition in Multi-Modal Transport Networks: A Dynamic Approach," Tinbergen Institute Discussion Papers 12-116/VIII, Tinbergen Institute.
  3. van den Berg, Vincent A.C., 2012. "Auctions for private congestible infrastructures," MPRA Paper 40103, University Library of Munich, Germany.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. van den Berg, Vincent A.C., 2013. "Serial private infrastructures," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 186-202.
  9. 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.

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