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The Economics of Transportation Network Growth

Listed author(s):
  • Lei Zhang
  • David Levinson


    (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)

A number of factors influence the efficiency, productivity, and welfare of a transportation network. Travel demand, user costs, and facility supply costs equilibrate on various time scales under a set of pricing (taxes and tolls), investment and ownership policies. Two types of equilibria exist in a transportation network, short-run traffic equilibrium and long-run supply-demand equilibrium. The phenomenon of traffic equilibrium is explored with a fixed transportation network where the capacity of links is given. Even though investment- and ownership-related policies are not of major concern for studies on traffic equilibrium, it is still a complex problem due to network congestion effects, variations of pricing rules, and multidimensionality of user choices. In order to understand the long-run supply-demand equilibrium in a transportation network, one has to consider all above-mentioned factors in a coherent analytical framework. We refer to this research problem as the transportation network growth problem, because the network evolves and link capacity is not fixed in the long run. Most previous studies have considered network pricing, investment, and ownership structures separately, which are reviewed. The paper considers choices of prices, capacity, and ownership simultaneously on small parallel, serial, and parallel-serial networks, and develops an analytical network model. We discuss properties of long-run network equilibria with different network layouts and ownership regimes, and the implications on network efficiency.

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File Function: First version, 2007
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Paper provided by University of Minnesota: Nexus Research Group in its series Working Papers with number 200710.

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Date of creation: 2006
Publication status: Published in Essays on Transportation Economics. Pablo Coto Millen and Vicente Inglada (ed.) Springer. Contributions to Economics.
Handle: RePEc:nex:wpaper:economicsofnetworkgrowth
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Dept. of Civil Engineering, 500 Pillsbury Drive SE, Minneapolis, MN 55455

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  1. David Levinson & Ramachandra Karamalaputi, 2003. "Induced Supply: A Model of Highway Network Expansion at the Microscopic Level," Journal of Transport Economics and Policy, University of Bath, vol. 37(3), pages 297-318, September.
  2. Verhoef, Erik & Nijkamp, Peter & Rietveld, Piet, 1996. "Second-Best Congestion Pricing: The Case of an Untolled Alternative," Journal of Urban Economics, Elsevier, vol. 40(3), pages 279-302, November.
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