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Pricing, Investment, and Network Equilibrium

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  • Lei Zhang
  • David Levinson

    ()
    (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)

Abstract

Despite rapidly emerging innovative road pricing and investment principles, the development of a long run network dynamics model for necessary policy evaluation is still lagging. This research endeavors to fill this gap and models the impacts of road financing policies throughout the network equilibration process. The manner in which pricing and investment jointly shape network equilibrium is particularly important and explored in this study. The interactions among travel demand, road supply, revenue mechanisms and investment rules are modeled at the link level in a network growth simulator. After assessing several measures of effectiveness, the proposed network growth model is able to evaluate the short- and long-run impacts of a broad spectrum of road pricing and investment policies on large-scale road networks, which can provide valuable information to decision-makers such as the implications of various policy scenarios on social welfare, financial situation of road authorities and potential implementation problems. Some issues hard to address in theoretical analysis can be examined in the agent-based simulation model. As a demonstration, we apply the network growth model to assess marginal and average pricing scenarios on a sample network. Even this relatively simple application provides new insights into issues around road pricing that have not previously been seriously considered. For instance, the results disclose a potential problem of over-investment when the marginal cost pricing scheme is adopted in conjunction with a myopic profit-neutral investment policy.

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File URL: http://nexus.umn.edu/Papers/PINE.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by University of Minnesota: Nexus Research Group in its series Working Papers with number 000032.

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Date of creation: 2004
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Publication status: Published in working paper
Handle: RePEc:nex:wpaper:pine

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Postal: Dept. of Civil Engineering, 500 Pillsbury Drive SE, Minneapolis, MN 55455
Phone: +01 (612) 625-6354
Fax: +01 (612) 626-7750
Web page: http://nexus.umn.edu
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Related research

Keywords: Transportation network equilibrium; Road growth; Pricing; Congestion toll; Investment; Transport policy analysis.;

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References

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  1. David Levinson & David Gillen, 1997. "The Full Cost of Intercity Highway Transportation," Working Papers 199704, University of Minnesota: Nexus Research Group.
  2. Small, Kenneth A., 1992. "Using the Revenues from Congestion Pricing," University of California Transportation Center, Working Papers qt32p9m3mm, University of California Transportation Center.
  3. Daganzo, Carlos F., 1995. "A pareto optimum congestion reduction scheme," Transportation Research Part B: Methodological, Elsevier, vol. 29(2), pages 139-154, April.
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Cited by:
  1. Lei Zhang & David Levinson, 2006. "Economics of Road Network Ownership," Working Papers 200908, University of Minnesota: Nexus Research Group.
  2. Lei Zhang & David Levinson, 2005. "Road Pricing with Autonomous Links," Working Papers 200506, University of Minnesota: Nexus Research Group.

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