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 with a pre-specified duration. The concession company is frequently remunerated through direct payments by road users (road tolls). In this context, it is important to understand the incentives it has to maintain a highway in proper conditions whilst at the same time it seeks to maximise its profits. We model this profit-maximisation problem in a dynamic setting where demand is partly a function of road quality in each period. We find that concession companies have incentives to "shirk" on their maintenance duties and let road quality degrade early in their concession contract; later on, the concession company invests more heavily in maintenance so as to return the highway to the public authority in good working conditions. We also analyse how these results are affected by changes in the road toll, costs and the duration of the concession contract.
|Date of creation:||Apr 2007|
|Contact details of provider:|| Postal: Rua Diogo Botelho, 1327; 4169 - 005 Porto|
Phone: +351 226 196 200
Fax: +351 226 196 291
Web page: http://www.catolicabs.porto.ucp.pt/
More information through EDIRC
References listed on IDEAS
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.:
- 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.
- Vickerman, Roger, 2004. "Maintenance incentives under different infrastructure regimes," Utilities Policy, Elsevier, vol. 12(4), pages 315-322, December.
When requesting a correction, please mention this item's handle: RePEc:cap:wpaper:042007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ricardo Goncalves)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.