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The interaction between tolls and capacity investment in serial and parallel transport networks

  • De Borger Bruno

    ()

    (University of Antwerp)

  • Dunkerley Fay

    ()

    (K.U.Leuven-Center for Economic Studies)

  • Proost Stef

    ()

    (K.U.Leuven-Center for Economic Studies; UCL - CORE)

The purpose of this paper is to compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks. When individual links of the network are operated by different regional or national authorities, toll and capacity competition is likely to result. Moreover, the problem is potentially complicated by the presence of both local and transit demand on each link of the network. We bring together and extend the recent literature on the topic and, using both theory and numerical simulation techniques, provide a careful comparison of toll and capacity interaction on serial and parallel network structures. First, we show that there is more tax exporting in serial transport corridors than on competing parallel road networks. Second, the inability to toll transit has quite dramatic negative welfare effects on parallel networks. On the contrary, in serial transport corridors it may actually be undesirable to allow the tolling of transit at all. Third, if the links are exclusively used by transit transport, toll and capacity decisions are independent in serial networks. This does not generally hold in the presence of local transport. Moreover, it contrasts with a parallel setting where regional authorities compete for transit; in that case, regional investment in capacity leads to lower Nash equilibrium tolls.

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File URL: http://www.econ.kuleuven.ac.be/ew/academic/energmil/downloads/ete-wp-2006-07.pdf
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Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment in its series Energy, Transport and Environment Working Papers Series with number ete0607.

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Length: 36 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:ete:etewps:ete0607
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Web page: http://www.econ.kuleuven.be/ew/academic/energmil
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  1. Small, Kenneth A. & Yan, Jia, 2001. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," University of California Transportation Center, Working Papers qt9569k1sz, University of California Transportation Center.
  2. DE BORGER, Bruno & PROOST, Stef & VAN DENDER, Kurt, 2004. "Congestion and tax competition in a parallel network," CORE Discussion Papers 2004018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Anna Bassanini & Jérôme Pouyet, 2004. "Strategic Choice of Financing Systems in Regulated and Interconnected Industries," Working Papers 2004-08, Centre de Recherche en Economie et Statistique.
  4. De Borger, Bruno & Van Dender, Kurt, 2005. "Prices, capacities and service quality in a congestible Bertrand duopoly," University of California Transportation Center, Working Papers qt1k51437c, University of California Transportation Center.
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