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A New Look at the Two-Mode Problem

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Author Info
Marvin Kraus () (Boston College)

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Abstract

This paper considers the second-best policy problem that arises when auto travel is priced below its marginal cost and there is a substitute mass transit mode. We analyze the problem by combining a model of a rail line based on Kraus and Yoshida (JUE (2002)) with the highway bottleneck model. The model involves a transit authority which optimizes, in addition to the fare, two dimensions of transit capacity. These are (1) the number of train units serving the route and (2) the capacity of an individual train unit. Under a very weak condition, second-best optimality involves expanding both dimensions of transit capacity. The larger of the effects is on train size.

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File URL: http://dx.doi.org/10.1016/S0094-1190(03)00079-2
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Publisher Info
Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 551.

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Length: 30 pages
Date of creation: 17 Dec 2002
Date of revision:
Publication status: Published, Journal of Urban Economics, 54:3, 511-530, 2003
Handle: RePEc:boc:bocoec:551

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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.:
  1. William C. Wheaton, 1978. "Price-Induced Distortions in Urban Highway Investment," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 622-632, Autumn. [Downloadable!] (restricted)
  2. Sherman, Roger, 1971. "Congestion Interdependence and Urban Transit Fares," Econometrica, Econometric Society, vol. 39(3), pages 565-76, May. [Downloadable!] (restricted)
  3. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer, vol. 34(1), pages 13-35. [Downloadable!] (restricted)
  4. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September. [Downloadable!] (restricted)
  5. Liu, Louie Nan & McDonald, John F., 1998. "Efficient Congestion Tolls in the Presence of Unpriced Congestion: A Peak and Off-Peak Simulation Model," Journal of Urban Economics, Elsevier, vol. 44(3), pages 352-366, November. [Downloadable!] (restricted)
  6. Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics. [Downloadable!]
  7. Small, Kenneth & Yan, Jia, 2000. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," Discussion Papers dp-00-08, Resources For the Future. [Downloadable!]
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  8. Erik T. Verhoef & Kenneth A. Small, 1999. "Product Differentiation on Roads: Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Tinbergen Institute Discussion Papers 99-066/3, Tinbergen Institute. [Downloadable!]
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  9. Israel Pressman, 1970. "A Mathematical Formulation of the Peak-Load Pricing Problem," Bell Journal of Economics, The RAND Corporation, vol. 1(2), pages 304-326, Autumn. [Downloadable!] (restricted)
  10. Liu, Louie Nan & McDonald, John F., 1999. "Economic efficiency of second-best congestion pricing schemes in urban highway systems," Transportation Research Part B: Methodological, Elsevier, vol. 33(3), pages 157-188, April. [Downloadable!] (restricted)
  11. Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-79, June. [Downloadable!] (restricted)
  12. Wilson, John D., 1983. "Optimal road capacity in the presence of unpriced congestion," Journal of Urban Economics, Elsevier, vol. 13(3), pages 337-357, May. [Downloadable!] (restricted)
  13. Kraus, Marvin & Yoshida, Yuichiro, 2002. "The Commuter's Time-of-Use Decision and Optimal Pricing and Service in Urban Mass Transit," Journal of Urban Economics, Elsevier, vol. 51(1), pages 170-195, January. [Downloadable!] (restricted)
  14. d'Ouville, Edmond L. & McDonald, John F., 1990. "Optimal road capacity with a suboptimal congestion toll," Journal of Urban Economics, Elsevier, vol. 28(1), pages 34-49, July. [Downloadable!] (restricted)
  15. 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. [Downloadable!] (restricted)
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  1. Bruno de Borger & Stef Proost, 2004. "Vertical and horizontal tax competition in the transport sector," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 45-64. [Downloadable!]
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