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Competition between highway operators: can we expect toll differentiation?

Author

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  • Paul Calcott

    (School of Economics and Finance, Victoria University of Wellington, New Zealand)

  • Shuntian Yao

    (Division of Applied Economics, Nanyang Technological University, Singapore)

Abstract

Where there are alternative roads to the same destination, competition between profit maximizing road operators is possible. Tolls on such roads could perform two welfare enhancing functions; discouraging excessive driving and allocating drivers between roads. The second of these functions will typically require some roads to be more expensive to drive on, and to be less congested, than others. Bertrand equilibrium will not always peform this second function. It may fail to allocate the most impatient drivers to less congested roads, as it does not always deliver toll differentiation. The performance of this second function is dependent on the first. That is, whether or not competing roads will be differentiated by tolls and congestion, will depend in part on the importance of discouraging marginal drivers. The equilibrium will not generally be fully efficient, but will often provide efficiency gains over other decentralized options.

Suggested Citation

  • Paul Calcott & Shuntian Yao, 2005. "Competition between highway operators: can we expect toll differentiation?," Economic Growth Centre Working Paper Series 0504, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:0504
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    File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2005/2005-04.pdf
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    References listed on IDEAS

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    Cited by:

    1. Clifford Winston, 2013. "On the Performance of the U.S. Transportation System: Caution Ahead," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 773-824, September.
    2. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road supply in networks with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 430-443.
    3. Winston, Clifford & Yan, Jia, 2011. "Can privatization of U.S. highways improve motorists' welfare?," Journal of Public Economics, Elsevier, vol. 95(7), pages 993-1005.
    4. Clifford Winston & Jia Yan, 2008. "US Highway Privatization and Heterogeneous Preferences," Working Papers 2008-20, School of Economic Sciences, Washington State University.
    5. van den Berg, Vincent A.C. & Verhoef, Erik T., 2012. "Is the travel time of private roads too short, too long, or just right?," Transportation Research Part B: Methodological, Elsevier, vol. 46(8), pages 971-983.
    6. André de Palma & Robin Lindsey & Fang Wu, 2008. "Private Operators and Time-of-Day Tolling on a Congested Road Network," Journal of Transport Economics and Policy, University of Bath, vol. 42(3), pages 397-433, September.

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    More about this item

    Keywords

    congestion; road pricing; networks; market structure;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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