Pricing and investment of cross-border transport infrastructure
AbstractWe develop a simple two-country model of international trade in which the transportation cost between countries is endogenously determined by decisions concerning capacity and price (road toll, rail fare) of infrastructure. We evaluate alternative regimes of pricing and investment, i.e., free access (e.g., public road), pricing and investment by two governments, and private operation. Comparisons between free-access and other regimes reveal that pricing plays a positive role of encouraging investment. However, pricing by governments results in lower welfare since excessively high prices are charged. We also show that higher welfare could be attained by elaborating the design of bidding systems for the right to build and operate the infrastructure.
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Bibliographic InfoPaper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 661.
Date of creation: Sep 2008
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Other versions of this item:
- Mun, Se-il & Nakagawa, Shintaro, 2010. "Pricing and investment of cross-border transport infrastructure," Regional Science and Urban Economics, Elsevier, vol. 40(4), pages 228-240, July.
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Systems - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Systems - - - Government Pricing and Policy
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