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Regulating Concessions of Toll Motorways, An Empirical Study on Fixed vs. Variable Term Contracts

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Author Info
Daniel Albalate () (Faculty of Economics, University of Barcelona)
Germa Bel () (Faculty of Economics, University of Barcelona)

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Abstract

Recent theoretical developments on concession contracts for long term infrastructure projects under uncertain demand show the benefits of allowing for flexible term contracts rather than fixing a rigid term. This study presents a simulation to compare both alternatives by using real data from the oldest Spanish toll motorway. For this purpose, we analyze how well the flexible term would have performed instead of the fixed length actually established. Our results show a huge reduction of the term of concession that would have dramatically decreased the firm’s benefits and the user’s overpayment due to the internalization of an unexpected traffic increase.

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File URL: http://www.ub.edu/irea/working_papers/2007/200706.pdf
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Publisher Info
Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 200706.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 23 pages
Date of creation: Mar 2007
Date of revision: Mar 2007
Handle: RePEc:ira:wpaper:200706

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Postal: Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona
Web page: http://www.ub.edu/irea/
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Related research
Keywords: Toll motorways privatization concessions regulation.

Find related papers by JEL classification:
H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out
L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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  1. Eduardo Engel & Alexander Galetovic & Ronald Fischer, 2003. "Privatizing Highways in Latin America: is it Possible to Fix What Went Wrong?," Documentos de Trabajo 163, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
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  2. Daniel Albalate & Germa Bel & Xavier Fageda, 2007. "Privatization and regulation of toll motorways in europe," IREA Working Papers 200704, University of Barcelona, Research Institute of Applied Economics, revised Mar 2007. [Downloadable!]
  3. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May. [Downloadable!] (restricted)
  4. Engel, Eduardo & Fischer, Ronald & Galetovic, Alexander, 1997. "Highway Franchising: Pitfalls and Opportunities," American Economic Review, American Economic Association, vol. 87(2), pages 68-72, May. [Downloadable!] (restricted)
    Other versions:
  5. Hinojosa, Sergio & Gomez-Lobo, Andres, 2000. "Broad roads in a thin country - infrastructure concessions in Chile," Policy Research Working Paper Series 2279, The World Bank. [Downloadable!]
  6. Eduardo M. R. A. Engel & Ronald D. Fischer & Alexander Galetovic, 2001. "Least-Present-Value-of-Revenue Auctions and Highway Franchising," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 993-1020, October. [Downloadable!] (restricted)
    Other versions:
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