The Two-Mode Problem: Second-Best Pricing and Capacity
AbstractSuppose that there are two congestible modes of travel from A to B - road and rail for concreteness - which are imperfect substitutes in demand. Road congestion from A to B is underpriced; this is an unalterable distortion. Compared to the first best, should the transportation planner choose a wider or narrower road, raise or lower the rail fare, and expand or contract rail capacity? This paper provides a synthetic review of the literature on the problem, presents some new results, and discusses directions for future research on this and related second-best problems.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 474.
Length: 40 pages
Date of creation: 29 Sep 2000
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second-best; pricing; investement; road; rail;
Find related papers by JEL classification:
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
- R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
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- Sherman, Roger, 1971. "Congestion Interdependence and Urban Transit Fares," Econometrica, Econometric Society, vol. 39(3), pages 565-76, May.
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