IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v118y2018icp430-443.html
   My bibliography  Save this article

Private road supply in networks with heterogeneous users

Author

Listed:
  • Fu, Xinying
  • van den Berg, Vincent A.C.
  • Verhoef, Erik T.

Abstract

We study different mixes of private and public supply of roads in a network with bottleneck congestion and heterogeneous users. There are two parallel links for one origin and destination pair and two groups of travellers, where the group with the higher value of time also has higher schedule delay values. Previous scholars argued that as users become more heterogeneous, they benefit more from product differentiation, making private supply of roads more efficient. However, we find that local monopoly power might also increase if there is a ‘separating equilibrium’, which is an equilibrium where at least one group only uses one private road due to the different combinations of toll and congestion of the two roads. The private road can thus increase its toll without worrying about the competition from the other road for this group: it has a local monopoly over them. This lowers the efficiency of private supply. The problem is especially severe with flat tolls, which are constant over the peak. With fine tolls – which vary continuously over the day – there tends to be a pooling equilibrium – where both types use both roads – and competition remains intense. Flat tolling is also worse for users than fine tolling, as it has higher generalized prices.

Suggested Citation

  • Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road supply in networks with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 430-443.
  • Handle: RePEc:eee:transa:v:118:y:2018:i:c:p:430-443
    DOI: 10.1016/j.tra.2018.09.025
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856417314490
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.tra.2018.09.025?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 34(1), pages 13-35.
    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. Lindsey, Robin & de Palma, André, 2014. "Cost recovery from congestion tolls with long-run uncertainty," Economics of Transportation, Elsevier, vol. 3(2), pages 119-132.
    5. Cantos-Sánchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, José J. & Álvarez-SanJaime, Óscar, 2011. "Viability of new road infrastructure with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(5), pages 435-450, June.
    6. d'Ouville, Edmond L. & McDonald, John F., 1990. "Effects of demand uncertainty on optimal capacity and congestion tolls for urban highways," Journal of Urban Economics, Elsevier, vol. 28(1), pages 63-70, July.
    7. 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.
    8. Verhoef, Erik T., 2007. "Second-best road pricing through highway franchising," Journal of Urban Economics, Elsevier, vol. 62(2), pages 337-361, September.
    9. van den Berg, Vincent A.C., 2014. "Coarse tolling with heterogeneous preferences," Transportation Research Part B: Methodological, Elsevier, vol. 64(C), pages 1-23.
    10. Edelson, Noel M, 1971. "Congestion Tolls Under Monopoly," American Economic Review, American Economic Association, vol. 61(5), pages 873-882, December.
    11. Small, Kenneth A., 2001. "The Value of Pricing," University of California Transportation Center, Working Papers qt0rm449sx, University of California Transportation Center.
    12. Paul Calcott & Shuntian Yao, 2005. "Competition between highway operators: can we expect toll differentiation?," Economic Growth Centre Working Paper Series 0504, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    13. Robin Lindsey, 2004. "Existence, Uniqueness, and Trip Cost Function Properties of User Equilibrium in the Bottleneck Model with Multiple User Classes," Transportation Science, INFORMS, vol. 38(3), pages 293-314, August.
    14. Small, Kenneth A. & Yan, Jia, 2001. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," Journal of Urban Economics, Elsevier, vol. 49(2), pages 310-336, March.
    15. Clifford Winston, 2013. "On the Performance of the U.S. Transportation System: Caution Ahead," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 773-824, September.
    16. Takayama, Yuki & Kuwahara, Masao, 2017. "Bottleneck congestion and residential location of heterogeneous commuters," Journal of Urban Economics, Elsevier, vol. 100(C), pages 65-79.
    17. Wang, Judith Y.T. & Lindsey, Robin & Yang, Hai, 2011. "Nonlinear pricing on private roads with congestion and toll collection costs," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 9-40, January.
    18. van den Berg, Vincent A.C., 2012. "Step-tolling with price-sensitive demand: Why more steps in the toll make the consumer better off," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(10), pages 1608-1622.
    19. Israel Luski, 1976. "On Partial Equilibrium in a Queuing System with Two Servers," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(3), pages 519-525.
    20. de Palma, Andre, 1992. "A Game-Theoretic Approach to the Analysis of Simple Congested Networks," American Economic Review, American Economic Association, vol. 82(2), pages 494-500, May.
    21. Yang, Hai & Meng, Qiang, 1998. "Departure time, route choice and congestion toll in a queuing network with elastic demand," Transportation Research Part B: Methodological, Elsevier, vol. 32(4), pages 247-260, May.
    22. Holgun-Veras, Jos & Cetin, Mecit, 2009. "Optimal tolls for multi-class traffic: Analytical formulations and policy implications," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(4), pages 445-467, May.
    23. Kraus, Marvin, 1982. "Highway pricing and capacity choice under uncertain demand," Journal of Urban Economics, Elsevier, vol. 12(1), pages 122-128, July.
    24. F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 38(4), pages 582-606.
    25. De Vany, Arthur & Saving, Thomas R, 1980. "Competition and Highway Pricing for Stochastic Traffic," The Journal of Business, University of Chicago Press, vol. 53(1), pages 45-60, January.
    26. Hall, Jonathan D., 2018. "Pareto improvements from Lexus Lanes: The effects of pricing a portion of the lanes on congested highways," Journal of Public Economics, Elsevier, vol. 158(C), pages 113-125.
    27. De Vany, Arthur S & Saving, Thomas R, 1977. "Product Quality, Uncertainty, and Regulation: The Trucking Industry," American Economic Review, American Economic Association, vol. 67(4), pages 583-594, September.
    28. Wu, Wen-Xiang & Huang, Hai-Jun, 2015. "An ordinary differential equation formulation of the bottleneck model with user heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 81(P1), pages 34-58.
    29. 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.
    30. Braid, Ralph M., 1996. "Peak-Load Pricing of a Transportation Route with an Unpriced Substitute," Journal of Urban Economics, Elsevier, vol. 40(2), pages 179-197, September.
    31. Winston, Clifford & Yan, Jia, 2011. "Can privatization of U.S. highways improve motorists' welfare?," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 993-1005, August.
    32. Wu, Di & Yin, Yafeng & Yang, Hai, 2011. "The independence of volume-capacity ratio of private toll roads in general networks," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 96-101, January.
    33. 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.
    34. Chen, Hongyu & Liu, Yang & Nie, Yu (Marco), 2015. "Solving the step-tolled bottleneck model with general user heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 81(P1), pages 210-229.
    35. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1996. "Information and Usage of Free-Access Congestible Facilities with Stochastic Capacity and Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 181-203, February.
    36. Liu, Yang & Nie, Yu (Marco) & Hall, Jonathan, 2015. "A semi-analytical approach for solving the bottleneck model with general user heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 71(C), pages 56-70.
    37. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1992. "Route choice with heterogeneous drivers and group-specific congestion costs," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 71-102, March.
    38. Gordon F. Newell, 1987. "The Morning Commute for Nonidentical Travelers," Transportation Science, INFORMS, vol. 21(2), pages 74-88, May.
    39. van den Berg, Vincent & Verhoef, Erik T., 2011. "Winning or losing from dynamic bottleneck congestion pricing?: The distributional effects of road pricing with heterogeneity in values of time and schedule delay," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 983-992, August.
    40. Hensher, David A. & Puckett, Sean M., 2007. "Congestion and variable user charging as an effective travel demand management instrument," Transportation Research Part A: Policy and Practice, Elsevier, vol. 41(7), pages 615-626, August.
    41. van den Berg, Vincent & Verhoef, Erik T., 2011. "Winning or losing from dynamic bottleneck congestion pricing?," Journal of Public Economics, Elsevier, vol. 95(7), pages 983-992.
    42. Erik T. Verhoef, 2008. "Private Roads: Auctions and Competition in Networks," Journal of Transport Economics and Policy, University of Bath, vol. 42(3), pages 463-493, September.
    43. Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-479, June.
    44. Feng Xiao & Zhen Qian & H. Zhang, 2011. "The Morning Commute Problem with Coarse Toll and Nonidentical Commuters," Networks and Spatial Economics, Springer, vol. 11(2), pages 343-369, June.
    45. Lu, Zhaoyang & Meng, Qiang, 2017. "Analysis of optimal BOT highway capacity and economic toll adjustment provisions under traffic demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 100(C), pages 17-37.
    46. Yang, Hai & Tang, Wilson H. & Man Cheung, Wing & Meng, Qiang, 2002. "Profitability and welfare gain of private toll roads in a network with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(6), pages 537-554, July.
    47. Yang, Hai & Huang, Hai-Jun, 2004. "The multi-class, multi-criteria traffic network equilibrium and systems optimum problem," Transportation Research Part B: Methodological, Elsevier, vol. 38(1), pages 1-15, January.
    48. Li, Zhi-Chun & Lam, William H.K. & Wong, S.C., 2017. "Step tolling in an activity-based bottleneck model," Transportation Research Part B: Methodological, Elsevier, vol. 101(C), pages 306-334.
    49. Erik T. Verhoef & Kenneth A. Small, 2004. "Product Differentiation on Roads," Journal of Transport Economics and Policy, University of Bath, vol. 38(1), pages 127-156, January.
    50. Börjesson, Maria & Kristoffersson, Ida, 2014. "Assessing the welfare effects of congestion charges in a real world setting," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 339-355.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yu, Xiaojuan & van den Berg, Vincent A.C. & Verhoef, Erik T. & Li, Zhi-Chun, 2022. "Will all autonomous cars cooperate? Brands’ strategic interactions under dynamic congestion," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 166(C).
    2. Fu, Yulan & Wang, Chenlan & Liu, Tian-Liang & Huang, Hai-Jun, 2021. "Parking management in the morning commute problem with ridesharing," Research in Transportation Economics, Elsevier, vol. 90(C).
    3. Berglihn, Elisabeth Cornelia & Gómez-Baggethun, Erik, 2021. "Ecosystem services from urban forests: The case of Oslomarka, Norway," Ecosystem Services, Elsevier, vol. 51(C).
    4. Huang, Naqun & Lien, Jaimie W. & Zheng, Jie, 2023. "To acquire or compete? Government intervention in transportation under different route structures," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 172(C).
    5. Vincent van den Berg, "undated". "Self-financing roads under coarse tolling and heterogeneous preferences," Tinbergen Institute Discussion Papers 22-045/VIII, Tinbergen Institute.
    6. Li, Zhi-Chun & Huang, Hai-Jun & Yang, Hai, 2020. "Fifty years of the bottleneck model: A bibliometric review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 139(C), pages 311-342.
    7. Shi, Shasha & Yin, Yafeng & An, Qingxian & Chen, Ke, 2021. "Optimal build-operate-transfer road contracts under information asymmetry and uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 152(C), pages 65-86.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road networks with uncertain demand," Research in Transportation Economics, Elsevier, vol. 70(C), pages 57-68.
    2. Li, Zhi-Chun & Huang, Hai-Jun & Yang, Hai, 2020. "Fifty years of the bottleneck model: A bibliometric review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 139(C), pages 311-342.
    3. van den Berg, Vincent A.C., 2024. "Self-financing roads under coarse tolling and preference heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 182(C).
    4. Meng, Qiang & Lu, Zhaoyang, 2017. "Quantitative analyses of highway franchising under build-operate-transfer scheme: Critical review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 102(C), pages 105-123.
    5. Yu, Xiaojuan & van den Berg, Vincent A.C. & Verhoef, Erik T., 2019. "Carpooling with heterogeneous users in the bottleneck model," Transportation Research Part B: Methodological, Elsevier, vol. 127(C), pages 178-200.
    6. Vincent van den Berg, "undated". "Self-financing roads under coarse tolling and heterogeneous preferences," Tinbergen Institute Discussion Papers 22-045/VIII, Tinbergen Institute.
    7. Vincent A.C. van den Berg & Erik T. Verhoef, 2015. "Robot Cars and Dynamic Bottleneck Congestion: The Effects on Capacity, Value of Time and Preference Heterogeneity," Tinbergen Institute Discussion Papers 15-062/VIII, Tinbergen Institute, revised 11 Jul 2016.
    8. van den Berg, Vincent A.C. & Verhoef, Erik T., 2012. "Is the travel time of private roads too short, too long, or just right?," Transportation Research Part B: Methodological, Elsevier, vol. 46(8), pages 971-983.
    9. Chen, Hongyu & Nie, Yu (Marco) & Yin, Yafeng, 2015. "Optimal multi-step toll design under general user heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 81(P3), pages 775-793.
    10. Winston, Clifford & Yan, Jia, 2011. "Can privatization of U.S. highways improve motorists' welfare?," Journal of Public Economics, Elsevier, vol. 95(7), pages 993-1005.
    11. Kenneth Small, 2015. "The Bottleneck Model: An Assessment and Interpretation," Working Papers 141506, University of California-Irvine, Department of Economics.
    12. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
    13. Cantos-Sánchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, José J. & Álvarez-SanJaime, Óscar, 2011. "Viability of new road infrastructure with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(5), pages 435-450, June.
    14. Small, Kenneth A., 2015. "The bottleneck model: An assessment and interpretation," Economics of Transportation, Elsevier, vol. 4(1), pages 110-117.
    15. Chen, Hongyu & Liu, Yang & Nie, Yu (Marco), 2015. "Solving the step-tolled bottleneck model with general user heterogeneity," Transportation Research Part B: Methodological, Elsevier, vol. 81(P1), pages 210-229.
    16. Liu, Yang & Li, Yuanyuan & Hu, Lu, 2018. "Departure time and route choices in bottleneck equilibrium under risk and ambiguity," Transportation Research Part B: Methodological, Elsevier, vol. 117(PB), pages 774-793.
    17. Takayama, Yuki, 2020. "Who gains and who loses from congestion pricing in a monocentric city with a bottleneck?," Economics of Transportation, Elsevier, vol. 24(C).
    18. Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
    19. Koster, Paul & Verhoef, Erik & Shepherd, Simon & Watling, David, 2018. "Preference heterogeneity and congestion pricing: The two route case revisited," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 137-157.
    20. Li, Zhi-Chun & Lam, William H.K. & Wong, S.C., 2017. "Step tolling in an activity-based bottleneck model," Transportation Research Part B: Methodological, Elsevier, vol. 101(C), pages 306-334.

    More about this item

    Keywords

    Congestion pricing; Bottleneck model; Heterogeneity; Private supply; Distributional effects;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:118:y:2018:i:c:p:430-443. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.