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Maintenance, service quality and congestion pricing with competing roads

  • de Palma, André
  • Kilani, Moez
  • Lindsey, Robin

This paper studies maintenance and tolling decisions by two competing private operators of roads that experience depreciation and congestion. Duopoly generally results in higher social costs not only than in the first-best optimum but also the second-best optimum in which roads can be maintained but not tolled. Duopoly as a rule performs best when roads have equal capacities and intrinsic qualities so that market power is balanced. It also performs better when maintenance and tolling decisions are made simultaneously rather than sequentially because firms in the sequential game curtail maintenance in the first stage in order to soften toll competition in the second stage.

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Article provided by Elsevier in its journal Transportation Research Part B: Methodological.

Volume (Year): 41 (2007)
Issue (Month): 5 (June)
Pages: 573-591

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Handle: RePEc:eee:transb:v:41:y:2007:i:5:p:573-591
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  1. 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.
  2. Kurt Van Dender, 2005. "Duopoly prices under congested access," Journal of Regional Science, Wiley Blackwell, vol. 45(2), pages 343-362.
  3. Bruno De Borger & Kurt Van Dender, 2005. "Prices, capacities and service quality in a congestible Bertrand duopoly," ERSA conference papers ersa05p221, European Regional Science Association.
  4. Newbery, David M, 1988. "Road Damage Externalities and Road User Charges," Econometrica, Econometric Society, vol. 56(2), pages 295-316, March.
  5. 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.
  6. Van Dender, Kurt, 2005. "Duopoly Prices Under Congested Access," University of California Transportation Center, Working Papers qt7xw8c3fn, University of California Transportation Center.
  7. André DE PALMA & Luc LERUTH, 1989. "Congestion and Game in Capacity: a Duopoly Analysis in the Presence of Network Externalities," Annales d'Economie et de Statistique, ENSAE, issue 15-16, pages 389-407.
  8. Small, Kenneth A & Winston, Clifford, 1988. "Optimal Highway Durability," American Economic Review, American Economic Association, vol. 78(3), pages 560-69, June.
  9. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
  10. 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.
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