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Regulating Concessions of Toll Motorways, An Empirical Study on Fixed vs. Variable Term Contracts

Author

Listed:
  • Daniel Albalate

    (Faculty of Economics, University of Barcelona)

  • Germa Bel

    (Faculty of Economics, University of Barcelona)

Abstract

Recent theoretical developments on concession contracts for long term infrastructure projects under uncertain demand show the benefits of allowing for flexible term contracts rather than fixing a rigid term. This study presents a simulation to compare both alternatives by using real data from the oldest Spanish toll motorway. For this purpose, we analyze how well the flexible term would have performed instead of the fixed length actually established. Our results show a huge reduction of the term of concession that would have dramatically decreased the firm’s benefits and the user’s overpayment due to the internalization of an unexpected traffic increase.

Suggested Citation

  • Daniel Albalate & Germa Bel, 2007. "Regulating Concessions of Toll Motorways, An Empirical Study on Fixed vs. Variable Term Contracts," IREA Working Papers 200706, University of Barcelona, Research Institute of Applied Economics, revised Mar 2007.
    • Handle: RePEc:ira:wpaper:200706
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    References listed on IDEAS

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    More about this item

    Keywords

    Toll motorways; privatization; concessions; regulation.;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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