IDEAS home Printed from https://ideas.repec.org/p/edj/ceauch/120.html

Highway Franchising and Real Estate Values

Author

Listed:
  • Eduardo Engel

  • Ronald Fischer

  • Alexander Galetovic

Abstract

It has become increasingly common to allocate highway franchises to the bidder that offers to charge the lowest toll. Often, building a highway increases the value of land held by a small group of developers, an effect that is more pronounced with lower tolls. We study the welfare implications of highway franchises that benefit large developers, focusing on the incentives developers have to internalize the effect of the toll they bid on the value of their land. We study how participation by developers in the auction affects equilibrium tolls and welfare. We find that large developers bid more aggressively than construction companies that own no land. As long as land ownership is sufficiently concentrated, allowing developers in the auction leads to lower tolls and higher welfare. Moreover, collusion among developers is socially desirable. We also analyze the case when the franchise holder can charge lower tolls to those buying her land ('toll discrimination'). Relative to uniform tolls, discrimination decreases welfare when land is highly concentrated, but increases welfare otherwise. Finally, we consider the welfare implications of subsidies and bonuses for proposing new highway projects.

Suggested Citation

  • Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2002. "Highway Franchising and Real Estate Values," Documentos de Trabajo 120, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:120
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Karolien De Bruyne & Jan Van Hove, 2013. "Explaining the spatial variation in housing prices: an economic geography approach," Applied Economics, Taylor & Francis Journals, vol. 45(13), pages 1673-1689, May.
    2. Marulanda, Beatriz & Montes, Miguel, 2004. "Desarrollo de proyectos viales y aportes del estado en terrenos," IDB Publications (Working Papers) 3242, Inter-American Development Bank.
    3. Bruce L. Benson, 2007. "Private Policing And Private Roads: A Coasian Approach To Drunk‐Driving Policy," Economic Affairs, Wiley Blackwell, vol. 27(4), pages 30-38, December.
    4. Beatriz Marulanda & Miguel Montes, 2004. "Desarrollo de proyectos viales y aportes del estado en terrenos," IDB Publications (Working Papers) 49398, Inter-American Development Bank.
    5. Feng, Zhuo & Gao, Ying & Song, Jinbo & He, Qiaochu, 2025. "An analysis of information disclosure in build–operate–transfer road projects," European Journal of Operational Research, Elsevier, vol. 322(1), pages 292-306.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H40 - Public Economics - - Publicly Provided Goods - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:edj:ceauch:120. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/ceuclcl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.