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On the change in surpluses equivalence: measuring benefits from transport infrastructure investments

Listed author(s):
  • Melendez-Hidalgo, Jose
  • Rietveld, Piet
  • Verhoef, Erik

Reductions in transport costs resulting from infrastructure improvements generate benefits that can be measured as surplus changes either at an economy-wide scale (social welfare changes) or, as is common practice in cost-benefit analysis (CBA), at a transport market level as transport users’ surplus changes. In this paper we look at an economy with spatially separated markets embedded in a transport network (a spatial price equilibrium model) to study the equivalence between these two benefit measures. Three different product market competition arrangements are considered. A similar question and strategy is presented in Jara-Diaz (1986) employing a two-node network and extreme competition assumptions on the production side: perfect competition and monopolistic production with arbitrage. We extend his work by additionally considering perfect collusion (monopoly without resale) and Cournot-Nash oligopoly under flow-dependent transport costs (i.e. congestion in transport). Numerical simulations in a three-node network with and without transshipment nodes, illustrate our main results.

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Article provided by ISTIEE, Institute for the Study of Transport within the European Economic Integration in its journal European Transport / Trasporti Europei.

Volume (Year): (2007)
Issue (Month): 36 ()
Pages: 107-140

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Handle: RePEc:sot:journl:y:2007:i:36:p:107-140
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  1. Paulo D. Waquil & THOMAS L. COX, 1995. "Spatial Equilibrium with Intermediate Products: Implementation and Validation in the Mercosur," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 388, Wisconsin-Madison Agricultural and Applied Economics Department.
  2. Pels, Eric & Verhoef, Erik T., 2004. "The economics of airport congestion pricing," Journal of Urban Economics, Elsevier, vol. 55(2), pages 257-277, March.
  3. Van Dender, Kurt, 2005. "Duopoly Prices Under Congested Access," University of California Transportation Center, Working Papers qt7xw8c3fn, University of California Transportation Center.
  4. Kanemoto, Yoshitsugu & Mera, Koichi, 1985. "General equilibrium analysis of the benefits of large transportation improvements," Regional Science and Urban Economics, Elsevier, vol. 15(3), pages 343-363, August.
  5. Yukihiro Kidokoro, 2004. "Cost-Benefit Analysis for Transport Networks: Theory and Application," Journal of Transport Economics and Policy, University of Bath, vol. 38(2), pages 275-307, May.
  6. Yang, Hai & Huang, Hai-Jun, 1998. "Principle of marginal-cost pricing: how does it work in a general road network?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(1), pages 45-54, January.
  7. Paulo D. WAQUIL & Thomas L. COX, 1995. "Spatial Equilibrium With Intermediate Products: Implementation And Validation In The Mercosur," Staff Papers 388, University of Wisconsin Madison, AAE.
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