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Pricing and investment of cross-border transport infrastructure

  • Se-il Mun

    ()

    (Graduate School of Economics, Kyoto University)

  • Shintaro Nakagawa

    (Institute of Economic Research, Kyoto University)

We develop a simple two-country model of international trade in which the transportation cost between countries is endogenously determined by decisions concerning capacity and price (road toll, rail fare) of infrastructure. We evaluate alternative regimes of pricing and investment, i.e., free access (e.g., public road), pricing and investment by two governments, and private operation. Comparisons between free-access and other regimes reveal that pricing plays a positive role of encouraging investment. However, pricing by governments results in lower welfare since excessively high prices are charged. We also show that higher welfare could be attained by elaborating the design of bidding systems for the right to build and operate the infrastructure.

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File URL: http://www.kier.kyoto-u.ac.jp/DP/DP661.pdf
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Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 661.

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Length: 30pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:kyo:wpaper:661
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  1. DE BORGER, Bruno & DUNKERLEY, Fay & PROOST, Stef, 2006. "Strategic investment and pricing decisions in a congested transport corridor," Working Papers 2006021, University of Antwerp, Faculty of Applied Economics.
  2. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
  3. Se-il Mun & Shintaro Nakagawa, 2008. "Cross-border transport infrastructure and aid policies," The Annals of Regional Science, Springer, vol. 42(2), pages 465-486, June.
  4. Spiros Bougheas & Panicos Demetriades & Edgar Morgenroth, 1996. "Infrastructure, Transport Costs and Trade," Keele Department of Economics Discussion Papers (1995-2001) 96/7, Department of Economics, Keele University.
  5. Eric W. Bond, 2006. "Transportation Infrastructure Investments And Trade Liberalization," The Japanese Economic Review, Japanese Economic Association, vol. 57(4), pages 483-500.
  6. David Levinson, 2000. "Revenue Choice on a Serial Network," Working Papers 200001, University of Minnesota: Nexus Research Group.
  7. Yang, Hai & Meng, Qiang, 2000. "Highway pricing and capacity choice in a road network under a build-operate-transfer scheme," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(3), pages 207-222, April.
  8. ANDERSON, P. & de PALMA, André & THISSE, Jacques-François, . "The CES and the logit.Two related models of heterogeneity," CORE Discussion Papers RP -785, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Verhoef, Erik T., 2007. "Second-best road pricing through highway franchising," Journal of Urban Economics, Elsevier, vol. 62(2), pages 337-361, September.
  10. Ubbels, Barry & Verhoef, Erik T., 2008. "Governmental competition in road charging and capacity choice," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 174-190, March.
  11. AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer, vol. 34(1), pages 13-35.
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