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The interaction between tolls and capacity investment in serial and parallel transport networks

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  • DE BORGER, Bruno
  • DUNKERLEY, Fay
  • PROOST, Stef

Abstract

The purpose of this paper is to compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks. When individual links of the network are operated by different regional or national authorities, toll and capacity competition is likely to result. Moreover, the problem is potentially complicated by the presence of both local and transit demand on each link of the network. We bring together and extend the recent literature on the topic and, using both theory and numerical simulation techniques, provide a careful comparison of toll and capacity interaction on serial and parallel network structures. First, we show that there is more tax exporting in serial transport corridors than on competing parallel road networks. Second, the inability to toll transit has quite dramatic negative welfare effects on parallel networks. On the contrary, in serial transport corridors it may actually beunde sirableto allow thetolling of transit at all. Third, if the links are exclusively used by transit transport, toll and capacity decisions are independent in serial networks. This does not generally hold in the presence of local transport. Moreover, it contrasts with a parallel setting where regional authorities compete for transit; in that case, regional investment in capacity leads to lower Nash equilibrium tolls.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006113.

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Date of creation: 00 Dec 2006
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Handle: RePEc:cor:louvco:2006113

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Keywords: congestion pricing; transport investment; transit traffic;

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References

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  1. DE BORGER, Bruno & PROOST, Stef & VAN DENDER, Kurt, 2004. "Congestion and tax competition in a parallel network," CORE Discussion Papers 2004018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Anna Bassanini & Jérôme Pouyet, 2004. "Strategic Choice of Financing Systems in Regulated and Interconnected Industries," Working Papers 2004-08, Centre de Recherche en Economie et Statistique.
  3. Robin Lindsey & André de Palma, 1997. "Private Toll Roads: A Dynamic Equilibrium Analysis," Tinbergen Institute Discussion Papers 97-057/3, Tinbergen Institute.
  4. Small, Kenneth A. & Yan, Jia, 2001. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," University of California Transportation Center, Working Papers qt9569k1sz, University of California Transportation Center.
  5. 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.
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Citations

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Cited by:
  1. Grahn-Voorneveld, Sofia, 2011. "Sharing profit in parallel and serial transport networks," Working papers in Transport Economics 2011:7, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
  2. Westin , Jonas & Basck, Pierre & Franklin, Joel P. & Proost , Stef & Raux , Charles, 2012. "Achieving political acceptability for new transport infrastructure in congested urban regions," Working papers in Transport Economics 2012:19, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
  3. Lei Zhang & David Levinson & Shanjiang Zhu, 2007. "Agent-Based Model of Price Competition and Product Differentiation on Congested Networks," Working Papers 200809, University of Minnesota: Nexus Research Group.
  4. Bruno De Borger & Wilfried Pauwels, 2010. "A Nash bargaining solution to models of tax and investment competition: tolls and investment in serial transport corridors," Working Papers 2010/1, Institut d'Economia de Barcelona (IEB).
  5. 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.
  6. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
  7. Proost, Stef & Dunkerley, Fay & Borger, Bruno De & Gühneman, Astrid & Koskenoja, Pia & Mackie, Peter & Loo, Saskia Van der, 2011. "When are subsidies to trans-European network projects justified?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(3), pages 161-170, March.
  8. 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.

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