Second-best road pricing through highway franchising
This paper considers the welfare impacts of a range of franchising regimes for congestible highways. For a single road in isolation, it is shown that a competitive auction with the level of road use as the decision criterion produces the socially optimal road (in terms of capacity and toll level) as the equilibrium outcome, provided constant returns to scale characterize highway operations. The auction outperforms various alternatives, in which the bidders are asked to minimize the toll level or toll revenues, or to maximize capacity or the bid for the franchise. When second-best network aspects are taken into account, the patronage-maximizing auction is no longer optimal. When unpriced congestion on parallel capacity dominates, the second-best highway would generate losses and the zero-profit condition becomes binding. The auction produces a below-optimal capacity. When unpriced congestion on serial capacity dominates, the auction produces an above-optimal capacity.
(This abstract was borrowed from another version of this item.)
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mills, David E, 1981. "Ownership Arrangements and Congestion-Prone Facilities," American Economic Review, American Economic Association, vol. 71(3), pages 493-502, June.
- Small, Kenneth A., 1999.
"Economies of scale and self-financing rules with non-competitive factor markets,"
Journal of Public Economics,
Elsevier, vol. 74(3), pages 431-450, December.
- Small, Kenneth A., 1996. "Economies of Scale and Self-Financing Rules with Noncompetitive Factor Markets," University of California Transportation Center, Working Papers qt70m3c7hh, University of California Transportation Center.
- Verhoef, Erik T., 2002. "Second-best congestion pricing in general static transportation networks with elastic demands," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 281-310, May.
- Erik T. Verhoef, 1998. "Second-Best Congestion Pricing in General Static Transportation Networks with Elastic Demand," Tinbergen Institute Discussion Papers 98-086/3, Tinbergen Institute.
- Erik T. Verhoef, 2000. "Second-Best Congestion Pricing in General Static Transportation Networks with Elastic Demands," Tinbergen Institute Discussion Papers 00-078/3, Tinbergen Institute.
- Ubbels, Barry & Verhoef, Erik T., 2008. "Auctioning concessions for private roads," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(1), pages 155-172, January.
- Barry Ubbels & Erik Verhoef, 2004. "Auctioning Concessions for Private Roads," Tinbergen Institute Discussion Papers 04-008/3, Tinbergen Institute.
- Edelson, Noel M, 1971. "Congestion Tolls Under Monopoly," American Economic Review, American Economic Association, vol. 61(5), pages 873-882, December.
- Verhoef, Erik T., 2002. "Second-best congestion pricing in general networks. Heuristic algorithms for finding second-best optimal toll levels and toll points," Transportation Research Part B: Methodological, Elsevier, vol. 36(8), pages 707-729, September.
- Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
- Richard Arnott & Marvin Kraus, 1995. "Self-Financing of Congestible Facilities in a Growing Economy," Boston College Working Papers in Economics 304., Boston College Department of Economics.
- Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
- Richard Arnott & An Yan, 2000. "The Two-Mode Problem: Second-Best Pricing and Capacity," Boston College Working Papers in Economics 474, Boston College Department of Economics.
- Newbery, David M, 1988. "Road Damage Externalities and Road User Charges," Econometrica, Econometric Society, vol. 56(2), pages 295-316, March.
- Yang, Hai & Meng, Qiang, 2002. "A note on "highway pricing and capacity choice in a road network under a build-operate-transfer scheme"," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(7), pages 659-663, August. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:juecon:v:62:y:2007:i:2:p:337-361. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.