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US Highway Privatization and Heterogeneous Preferences

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Author Info

  • Clifford Winston
  • Jia Yan

    ()
    (School of Economic Sciences, Washington State University)

Abstract

Abstract: We assess the welfare effects of highway privatization accounting for government’s behavior in setting the sale price, firms’ strategic behavior in setting tolls in various competitive environments, and motorists’ heterogeneous preferences for speedy and reliable travel. We conclude motorists can benefit from privatization if they are able to negotiate aggressively with a private provider to obtain tolls and service that align with their varying preferences. Surprisingly, motorists are likely to be better off negotiating with a monopolist than with duopoly providers or under public-private competition. Toll regulation may be counterproductive because it would treat motorists as homogeneous. Revised June 2009.

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File URL: http://faculty.ses.wsu.edu/WorkingPapers/Yan/RoadsPaper_WP2008-20_6-16-09.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2008-20.

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Length: 61 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:wsu:wpaper:yan-2

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Keywords: Security Breach Costs; Financial Distress; Insurance; Resource Allocation.;

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References

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  1. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2013. "The Basic Public Finance Of Public–Private Partnerships," Journal of the European Economic Association, European Economic Association, vol. 11(1), pages 83-111, 02.
  2. Clifford Winston, 2000. "Government Failure in Urban Transportation," Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 403-425, December.
  3. Paul Calcott & Shuntian Yao, 2005. "Competition between highway operators: Can we expect toll differentiation?," Papers in Regional Science, Wiley Blackwell, vol. 84(4), pages 615-626, November.
  4. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer, vol. 34(1), pages 13-35.
  5. Paul Calcott & Shuntian Yao, 2005. "Competition between highway operators: can we expect toll differentiation?," Economic Growth centre Working Paper Series 0504, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  6. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2005. "Privatizing Highways in the United States," Documentos de Trabajo 209, Centro de Economía Aplicada, Universidad de Chile.
  7. Small, Kenneth A. & Winston, Clifford & Yan, Jia, 2006. "Differentiated Road Pricing, Express Lanes and Carpools: Exploiting Heterogeneous Preferences in Policy Design," Working paper 189, Regulation2point0.
  8. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 1998. "Least-Present-Value-of-Revenue Auctions and Highway Franchising," Documentos de Trabajo 37, Centro de Economía Aplicada, Universidad de Chile.
  9. Hideo Konishi, 2001. "Uniqueness of User Equilibrium in Transportation Networks with Heterogeneous Commuters," Boston College Working Papers in Economics 494, Boston College Department of Economics, revised 14 Nov 2002.
  10. Kenneth A. Small, 2009. "Private Provision of Highways: Economic Issues," Working Papers 080917, University of California-Irvine, Department of Economics.
  11. de Palma, Andre & Lindsey, Robin, 2002. "Private roads, competition, and incentives to adopt time-based congestion tolling," Journal of Urban Economics, Elsevier, vol. 52(2), pages 217-241, September.
  12. Choi, Ki-Hong & Moon, Choon-Geol, 1997. "Generalized extreme value model and additively separable generator function," Journal of Econometrics, Elsevier, vol. 76(1-2), pages 129-140.
  13. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2003. "Privatizing Highways in Latin America: Fixing What Went Wrong," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  14. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
  15. Small, Kenneth A. & Winston, Clifford & Yan, Jia, 2005. "Uncovering the Distribution of Motorists' Preferences for Travel Time and Reliability," Working paper 179, Regulation2point0.
  16. Edelson, Noel M, 1971. "Congestion Tolls Under Monopoly," American Economic Review, American Economic Association, vol. 61(5), pages 873-82, December.
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