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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)

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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Bibliographic Info

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

Related research

Keywords: traffic congestion; road pricing; road capacity; tax competition;

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References

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Citations

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Cited by:
  1. Bruno DE BORGER & Stefan PROOST, 2012. "Policies to reduce traffic externalities in cities," Center for Economic Studies - Discussion papers ces12.10, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  2. 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.
  3. Russo, Antonio, 2013. "Voting on road congestion policy," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 707-724.
  4. Se-il Mun & Shintaro Nakagawa, 2008. "Pricing and investment of cross-border transport infrastructure," KIER Working Papers 661, Kyoto University, Institute of Economic Research.
  5. Bruno DE BORGER & Stefan PROOST, 2013. "The political economy of pricing and capacity decisions for congestible local public goods in a federal state," Center for Economic Studies - Discussion papers ces13.16, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  6. De Borger, Bruno & Proost, Stef, 2013. "Traffic externalities in cities: The economics of speed bumps, low emission zones and city bypasses," Journal of Urban Economics, Elsevier, vol. 76(C), pages 53-70.
  7. Erik T. Verhoef, 2007. "Private Roads," Tinbergen Institute Discussion Papers 07-093/3, Tinbergen Institute, revised 25 Jun 2008.
  8. Gühnemann, Astrid & Koh, Andrew & Shepherd, Simon & Lawler, Mary, 2011. "Implications of interdependencies between charging strategies of local authorities for the protection of sensitive areas in the Trans-Pennine Corridor," Utilities Policy, Elsevier, vol. 19(1), pages 42-52, January.
  9. Erik T. Verhoef, 2007. "Private Roads," Tinbergen Institute Discussion Papers 07-093/3, Tinbergen Institute, revised 25 Jun 2008.
  10. 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).

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