Auctioning concessions for private roads
Private toll roads are now seriously considered as an alternative to public (free-access) road infrastructure. Nevertheless, complete private provision without governmental control is only rarely considered. A main consideration against private roads would be that operators would be primarily interested in maximizing profits, which - given the market power they will have - will typically not lead to welfare-maximizing tolls and capacities. An important question is whether these discrepancies can be mitigated by a proper design of auctions for concessions of private roads. This paper therefore analyses capacity choice and toll setting by private investors in a competitive bidding framework organized by the government. We develop a two-link network simulation model with an untolled alternative to determine relative efficiency effects, and analyze rules for the government to organize the bidding process such that a more desired (welfare optimal) outcome is achieved. Our results show that, depending on the design of the auction, its outcomes may vary strongly, and may approach the maximum possible (second-best) welfare gains.
Volume (Year): 42 (2008)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
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.:
- Peter Nijkamp & Sytze A.Rienstra, 1997.
"Lessons from Private Financing of Transport Infrastructure : Dutch Infrastructure in the 19th Century and European projects in the 20th Century,"
Programme National Persée, vol. 48(2), pages 231-246.
- Rienstra, S.A. & Nijkamp, P., 1996. "Lessons from private financing of transport infrastructure: Dutch infrastructure in the 19th century and European projects in the 20th century," Serie Research Memoranda 0013, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
- Yang, Hai & Meng, Qiang, 2000. "Highway pricing and capacity choice in a road network under a build-operate-transfer scheme," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(3), pages 207-222, April.
- Edelson, Noel M, 1971. "Congestion Tolls Under Monopoly," American Economic Review, American Economic Association, vol. 61(5), pages 873-82, December.
- Mills, David E, 1981. "Ownership Arrangements and Congestion-Prone Facilities," American Economic Review, American Economic Association, vol. 71(3), pages 493-502, June.
- Jyh-Fa Tsai & Chih-Peng Chu, 2003. "The analysis of regulation on private highway investment under a build-operate-transfer scheme," Transportation, Springer, vol. 30(2), pages 221-243, May.
- Liu, Louie Nan & McDonald, John F., 1998. "Efficient Congestion Tolls in the Presence of Unpriced Congestion: A Peak and Off-Peak Simulation Model," Journal of Urban Economics, Elsevier, vol. 44(3), pages 352-366, November.
- 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 & 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.
- Verhoef, Erik T., 2007. "Second-best road pricing through highway franchising," Journal of Urban Economics, Elsevier, vol. 62(2), pages 337-361, September.
- 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.
When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:42:y:2008:i:1:p:155-172. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.