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Pricing, Capacity Choice and Financing in Transportation Networks

Author

Listed:
  • Erik T. Verhoef

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Jan Rouwendal

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

Abstract

This paper explores the interrelations between pricing, capacity choice and financingin transportation networks. It builds on the famous Mohring-Harwitz result on self-financing ofoptimally designed roads under optimal congestion pricing, and specifically investigates itsins and outs in a network environment and under various types of second-best regulation. Thepaper develops a small network model, with endogenous car-ownership, in order to study thesequestions both from an analytical and a numerical viewpoint. It is for instance shown thatapplication of the principle over an entire network may cause user prices to increase morestrongly in initially mildly congested areas compared to heavily congested areas, and that aflat kilometre charge, provided accompanied with optimal capacity policies, may result infirst-best efficiency gains.

Suggested Citation

  • Erik T. Verhoef & Jan Rouwendal, 2003. "Pricing, Capacity Choice and Financing in Transportation Networks," Tinbergen Institute Discussion Papers 03-027/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20030027
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    Keywords

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    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
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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