Maintenance Incentives in Highway Concession Contracts
In most European countries, the private sector has a direct or indirect participation in the construction, overhaul, maintenance, or operation of highways, normally through concession contracts and often with direct payments (tolls) by users. In this context, we construct a model, where demand also depends on road quality, in order to understand the incentives that a profit-maximising concessionaire has to maintain a highway in proper conditions. We provide an economic rationale for our results and also analyse how they are affected by changes in tolls, costs, and the duration of the concession contract. © 2012 LSE and the University of Bath
References listed on IDEAS
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- Vickerman, Roger, 2004. "Maintenance incentives under different infrastructure regimes," Utilities Policy, Elsevier, vol. 12(4), pages 315-322, December.
- Rommert Dekker & Raymond Ph. Plasmeijer & Jan H. Swart, 1997. "Evaluation of a New Maintenance Concept for the Preservation of Highways," Tinbergen Institute Discussion Papers 97-129/4, Tinbergen Institute.