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Pricing, Investment, and Network Equilibrium

Author

Listed:
  • Lei Zhang
  • David Levinson

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

Abstract

Despite rapidly emerging innovative road pricing and investment principles, the development of a long run network dynamics model for necessary policy evaluation is still lagging. This research endeavors to fill this gap and models the impacts of road financing policies throughout the network equilibration process. The manner in which pricing and investment jointly shape network equilibrium is particularly important and explored in this study. The interactions among travel demand, road supply, revenue mechanisms and investment rules are modeled at the link level in a network growth simulator. After assessing several measures of effectiveness, the proposed network growth model is able to evaluate the short- and long-run impacts of a broad spectrum of road pricing and investment policies on large-scale road networks, which can provide valuable information to decision-makers such as the implications of various policy scenarios on social welfare, financial situation of road authorities and potential implementation problems. Some issues hard to address in theoretical analysis can be examined in the agent-based simulation model. As a demonstration, we apply the network growth model to assess marginal and average pricing scenarios on a sample network. Even this relatively simple application provides new insights into issues around road pricing that have not previously been seriously considered. For instance, the results disclose a potential problem of over-investment when the marginal cost pricing scheme is adopted in conjunction with a myopic profit-neutral investment policy.

Suggested Citation

  • Lei Zhang & David Levinson, 2004. "Pricing, Investment, and Network Equilibrium," Working Papers 000032, University of Minnesota: Nexus Research Group.
    • Handle: RePEc:nex:wpaper:pine
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    File URL: http://hdl.handle.net/11299/179824
    File Function: First version, 2007
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    References listed on IDEAS

    as
    1. Hyman, Geoffrey & Mayhew, Les, 2002. "Optimizing the benefits of urban road user charging," Transport Policy, Elsevier, vol. 9(3), pages 189-207, July.
    2. David Levinson & David Gillen, 1997. "The Full Cost of Intercity Highway Transportation," Working Papers 199704, University of Minnesota: Nexus Research Group.
    3. Small, Kenneth A., 1992. "Using the Revenues from Congestion Pricing," University of California Transportation Center, Working Papers qt32p9m3mm, University of California Transportation Center.
    4. Small, Kenneth A., 2001. "Using the Revenues from Congestion Pricing," University of California Transportation Center, Working Papers qt7170x9b0, University of California Transportation Center.
    5. Daganzo, Carlos F., 1995. "A pareto optimum congestion reduction scheme," Transportation Research Part B: Methodological, Elsevier, vol. 29(2), pages 139-154, April.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Lei Zhang & David Levinson, 2006. "Economics of Road Network Ownership," Working Papers 200908, University of Minnesota: Nexus Research Group.
    2. Lei Zhang & David Levinson, 2005. "Road Pricing with Autonomous Links," Working Papers 200506, University of Minnesota: Nexus Research Group.

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    More about this item

    Keywords

    Transportation network equilibrium; Road growth; Pricing; Congestion toll; Investment; Transport policy analysis.;
    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
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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