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Network development under a strict self-financing constraint

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Author Info
André De Palma
Stef Proost
Saskia Van Der Loo

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Abstract

This paper offers a stylized model in which an agency is in charge of investing in road capacity and maintain it but cannot use the capital market so that the only sources of funds are the toll revenues. We call this the strict self-financing constraint in opposition to the traditional self financing constraint where implicitly 100% of the investment needs can be financed by loans. Two stylised problems are analysed: the one link problem and the problem of two parallel links with one link untolled. The numerical illustrations show the cost of the strict self-financing constraint as a function of the importance of the initial infrastructure stock, the rate of growth of demand, the price elasticity of demand and the flexibility in the pricing instruments.

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File URL: http://www.econ.kuleuven.be/eng/ew/discussionpapers/Dps08/Dps0829.pdf
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Publisher Info
Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0829.

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Date of creation: Oct 2008
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Handle: RePEc:ete:ceswps:ces0829

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Related research
Keywords: Cost-benefit analysis; road tolling; self-financing; infrastructure investments; congestion; bottleneck model.;

Find related papers by JEL classification:
R42 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government and Private Investment Analysis
L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
R40 - Urban, Rural, and Regional Economics - - Transportation Systems - - - General

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This page was last updated on 2009-11-26.

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