IDEAS home Printed from
   My bibliography  Save this paper

Exploring the congested parallel route problem with variable substitutability


  • Andre DE PALMA
  • Stefan PROOST


Many transport and other service problems come down to simple network choices: what mode and/or route to take, when some of the routes and modes are congested and their use can be priced or not priced by different operators. The operators can have different objectives and face different market environments: public or private monopoly, private duopoly, etc.. This standard problem has been studied in many variants, mostly using the assumption of perfect substitutability between alternatives, so that in the deterministic Wardrop equilibrium, all routes that are used have the same generalized cost. This paper examines in more detail the role of the substitutability assumption using varying degrees of unobserved individual heterogeneity. Users of a network consume transport services, which are differentiated in two ways. There are objective differences in quality (length of route, congestion level) perceived in the same way by all users but there are also individual idiosyncratic preferences or unobserved heterogeneity (e.g. in modal choice) for transport services. The resulting stochastic equilibrium is analysed on a simple parallel network for four types of ownership regimes: private ownership, coordinated public ownership, mixed public-private and public Stackelberg leadership. First we synthesize the literature and prove rigorously that when total demand is fixed and there is congestion, then by controlling one route a government can achieve the First Best allocation, irrespective of whether the second route is privately operated or unpriced. This result holds whatever the level of substitutability and whatever the levels of congestion on the two routes. Secondly, we rank ownership regimes when the government cannot control the pricing of any route. If there is no congestion, no pricing is obviously best and second best is to have only the inferior route privately priced. If there is congestion and the heterogeneity in the preferences is limited, it is still best to have the more congestible route privately tolled.

Suggested Citation

  • Andre DE PALMA & Fay DUNKERLEY & Stefan PROOST, 2013. "Exploring the congested parallel route problem with variable substitutability," Working Papers Department of Economics ces13.21, KU Leuven, Faculty of Economics and Business, Department of Economics.
  • Handle: RePEc:ete:ceswps:ces13.21

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:ete:ceswps:ces13.21. 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: (library EBIB). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.