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Pricing, Capacity Choice and Financing in Transportation Networks

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Author Info
Erik T. Verhoef () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)
Jan Rouwendal () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

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Abstract

This paper explores the interrelations between pricing, capacity choice and financing in transportation networks. It builds on the famous Mohring-Harwitz result on self-financing of optimally designed roads under optimal congestion pricing, and specifically investigates its ins and outs in a network environment and under various types of second-best regulation. The paper develops a small network model, with endogenous car-ownership, in order to study these questions both from an analytical and a numerical viewpoint. It is for instance shown that application of the principle over an entire network may cause user prices to increase more strongly in initially mildly congested areas compared to heavily congested areas, and that a flat kilometre charge, provided accompanied with optimal capacity policies, may result in first-best efficiency gains.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-027/3.

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Date of creation: 27 Mar 2003
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Handle: RePEc:dgr:uvatin:20030027

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: Traffic congestion; Road pricing; Road capacity choice.;

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Find related papers by JEL classification:
R41 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Transportation: Demand, Supply, and Congestion
R48 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government Pricing; Regulatory Policies
D62 - Microeconomics - - Welfare Economics - - - Externalities

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  1. De Borger Bruno & Mayeres Inge, 2004. "Taxation of car ownership, car use and public transport: insights derived from a discrete choice numerical optimisation model," Energy, Transport and Environment Working Papers Series ete0413, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment. [Downloadable!]
    Other versions:
  2. 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!]
    Other versions:
  3. Andrew Koh & Simon Shepherd & Agachai Sumalee, 2009. "Second best toll and capacity optimisation in networks: solution algorithm and policy implications," Transportation, Springer, vol. 36(2), pages 147-165, March. [Downloadable!] (restricted)
  4. Erik T. Verhoef & Herbert Mohring, 2007. "Self-Financing Roads," Tinbergen Institute Discussion Papers 07-068/3, Tinbergen Institute. [Downloadable!]
  5. Erik T. Verhoef & Andrew Koh & Simon Shepherd, 2008. "Pricing, Capacity and Long-run Cost Functions for First-best and Second-best Network Problems," Tinbergen Institute Discussion Papers 08-056/3, Tinbergen Institute. [Downloadable!]
  6. Piet Rietveld & Stefan van Woudenberg, 2007. "Second Best Decision Making of Railway Operators: How to fix Fares, Frequency and Vehicle Size," Tinbergen Institute Discussion Papers 07-007/3, Tinbergen Institute. [Downloadable!]
    Other versions:
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