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Governmental Competition in Road Charging and Capacity Choice

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Author Info
Barry Ubbels () (Faculty of Economics and Econometrics, Vrije Universiteit Amsterdam)
Erik Verhoef () (Faculty of Economics and Econometrics, Vrije Universiteit Amsterdam)

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Abstract

In this study we have analysed policy interactions between an urban and a regional government which have different objectives (welfare of its own citizens) and two policy instruments (toll and capacity) available. Using a simulation model, we investigated the welfare consequences of the various regimes that result when both governments compete, and take sequential decisions on prices and capacities. We find that competition between governments may not be very beneficial to overall welfare in society compared with one central government. It appears that the tendency of tax exporting is very strong in this setting where commuters have to pay road tolls set by the city government. The main issue is not which exact type of game is played between the two actors, but much more whether there is cooperation (leading to first-best) or competition between governments, where of secondary importance is the question who is leading in the price stage (if there is a leader). Sensitivity analysis suggests that the performance for most game situations improves when demand becomes more elastic. When the price of road investment changes, the performance relative to the optimal situation remains more or less equal for all cases.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-036/3.

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Date of creation: 01 Apr 2006
Date of revision: 10 Sep 2007
Handle: RePEc:dgr:uvatin:20060036

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Related research
Keywords: traffic congestion road pricing road capacity tax competition

Find related papers by JEL classification:
R4 - Urban, Rural, and Regional Economics - - Transportation Systems

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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. De Borger Bruno & Stef Proost, 2004. "Vertical and horizontal tax competition in the transport sector," Energy, Transport and Environment Working Papers Series ete0412, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment. [Downloadable!]
    Other versions:
  2. 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)
  3. 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)
  4. 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)
  5. Barry Ubbels & Erik Verhoef, 2004. "Auctioning Concessions for Private Roads," Tinbergen Institute Discussion Papers 04-008/3, Tinbergen Institute. [Downloadable!]
  6. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer. [Downloadable!] (restricted)
  7. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January. [Downloadable!] (restricted)
  8. David Levinson, 2001. "Why States Toll: An Empirical Model of Finance Choice," Working Papers 200102, University of Minnesota: Nexus Research Group. [Downloadable!]
  9. Erik T. Verhoef, 2005. "Second-best Road Pricing Through Highway Franchising," Tinbergen Institute Discussion Papers 05-082/3, Tinbergen Institute. [Downloadable!]
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  10. 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. [Downloadable!]
  11. De Borger, Bruno & Courcelle, Christophe & Swysen, Didier, 2004. "Optimal pricing of transport externalities in an international environment: some empirical results based on a numerical optimization model," Regional Science and Urban Economics, Elsevier, vol. 34(2), pages 163-201, March. [Downloadable!] (restricted)
  12. 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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