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Private financing of roads and optimal pricing: Is it possible to get both?


  • Ginés de Rus


  • Manuel Romero


Road pricing has been defended by economists as a useful instrument to internalize the costs that road users impose upon other users and the rest of society, with the aim of allocating scarce space and to reduce congestion to an efficient level. More recently, private participation in the construction, maintenance and operation of road infrastructure has been growing all over the world to face the challenge of tight budget constraints and increasing demand for additional road capacity. Fixed term concessions have been the standard contract between the public sector and private operators. Demand uncertainty and fixed term contracts have made impossible to fulfill the concession agreement in many cases, and contract renegotiation has been used to restore financial equilibrium. This has some undesirable economic consequences: selecting the most efficient concessionaire is not longer guaranteed and prices lose their role as signals for allocative efficiency. This paper addresses the problem of giving that role back to pricing, analyzing the possibility of achieving efficient pricing and cost recovery without contract renegotiation. Copyright Springer-Verlag 2004

Suggested Citation

  • Ginés de Rus & Manuel Romero, 2004. "Private financing of roads and optimal pricing: Is it possible to get both?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 38(3), pages 485-497, September.
  • Handle: RePEc:spr:anresc:v:38:y:2004:i:3:p:485-497
    DOI: 10.1007/s00168-003-0177-2

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    Cited by:

    1. 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.
    2. Albalate, Daniel & Bel, Germà, 2009. "Regulating concessions of toll motorways: An empirical study on fixed vs. variable term contracts," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(2), pages 219-229, February.
    3. repec:eee:transb:v:102:y:2017:i:c:p:105-123 is not listed on IDEAS
    4. Odeck, James, 2017. "Government versus toll funding of road projects – A theoretical consideration with an ex-post evaluation of implemented toll projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 98(C), pages 97-107.
    5. Dieplinger, Maria & Fürst, Elmar, 2014. "The acceptability of road pricing: Evidence from two studies in Vienna and four other European cities," Transport Policy, Elsevier, vol. 36(C), pages 10-18.
    6. Hoffman, Karla & Berardino, Frank & Hunter, George, 2013. "Congestion pricing applications to manage high temporal demand for public services and their relevance to air space management," Transport Policy, Elsevier, vol. 28(C), pages 28-41.
    7. Tan, Zhijia & Yang, Hai, 2012. "Flexible build-operate-transfer contracts for road franchising under demand uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 46(10), pages 1419-1439.

    More about this item


    D4; H4; L9; R4;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • H4 - Public Economics - - Publicly Provided Goods
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics


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