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Pricing, Capacity Choice and Financing in Transportation Networks

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  • Erik Teodoor Verhoef

    ()

  • Jan Rouwendal

    ()

Abstract

This paper explores the inerrelations between pricing, capacity choice and financing in transportation networks. It builds on the famous Mohring-Harwitz result on self-financing of optimally designed roads under optimal congestion pricing, and specifically asks the following questions: (1) to what extent does the result apply under conditions of second-best pricing?; (2) which are the implications of having uncongested (e.g. rural) roads in a network?; and (3) what is the role of fixed (annual) taxes in this context? The paper develops a small network model, with endogenous car-ownership, in order to study these questions both from an analytical and a numerical viewpoint.

Suggested Citation

  • Erik Teodoor Verhoef & Jan Rouwendal, 2003. "Pricing, Capacity Choice and Financing in Transportation Networks," ERSA conference papers ersa03p41, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa03p41
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    References listed on IDEAS

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    6. Liu, Louie Nan & McDonald, John F., 1998. "Efficient Congestion Tolls in the Presence of Unpriced Congestion: A Peak and Off-Peak Simulation Model," Journal of Urban Economics, Elsevier, vol. 44(3), pages 352-366, November.
    7. Verhoef, Erik T., 2002. "Second-best congestion pricing in general networks. Heuristic algorithms for finding second-best optimal toll levels and toll points," Transportation Research Part B: Methodological, Elsevier, vol. 36(8), pages 707-729, September.
    8. 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.
    9. Mohring, Herbert, 1970. "The Peak Load Problem with Increasing Returns and Pricing Constraints," American Economic Review, American Economic Association, vol. 60(4), pages 693-705, September.
    10. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
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    21. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 261-279, June.
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    Cited by:

    1. Tan, Zhijia & Yang, Hai & Guo, Xiaolei, 2010. "Properties of Pareto-efficient contracts and regulations for road franchising," Transportation Research Part B: Methodological, Elsevier, vol. 44(4), pages 415-433, May.
    2. DE BORGER, Bruno & MAYERES, Inge, "undated". "Taxation of car-ownership, car use and public transport: Insight derived from a discrete choice numerical optimisation model," Working Papers 2004021, University of Antwerp, Faculty of Applied Economics.
    3. repec:gam:jsusta:v:8:y:2016:i:3:p:265:d:65622 is not listed on IDEAS
    4. Liu, Tian-Liang & Chen, Jian & Huang, Hai-Jun, 2011. "Existence and efficiency of oligopoly equilibrium under toll and capacity competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 47(6), pages 908-919.
    5. Kilani, Moez & Proost, Stef & van der Loo, Saskia, 2014. "Road pricing and public transport pricing reform in Paris: Complements or substitutes?," Economics of Transportation, Elsevier, vol. 3(2), pages 175-187.
    6. Bruno de Borger & Stef Proost, 2004. "Vertical and horizontal tax competition in the transport sector," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 45-64.
    7. Feng Xie & David Levinson, 2009. "Governance choice on a serial network," Public Choice, Springer, vol. 141(1), pages 189-212, October.
    8. 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.
    9. Piet Rietveld & Stefan van Woudenberg, 2007. "Second-best Decision Making of Railway Operators: How to Fix Fares, Frequency and Vehicle Size," Journal of Transport Economics and Policy, University of Bath, vol. 41(3), pages 363-385, September.
    10. Erik T. Verhoef & Herbert Mohring, 2007. "Self-Financing Roads," Tinbergen Institute Discussion Papers 07-068/3, Tinbergen Institute.
    11. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
    12. repec:eee:retrec:v:62:y:2017:i:c:p:68-79 is not listed on IDEAS
    13. De Borger, Bruno & Mayeres, Inge, 2007. "Optimal taxation of car ownership, car use and public transport: Insights derived from a discrete choice numerical optimization model," European Economic Review, Elsevier, vol. 51(5), pages 1177-1204, July.
    14. M. Rouhani, Omid, 2014. "Road pricing: An overview," MPRA Paper 59662, University Library of Munich, Germany.
    15. Verhoef, Erik T. & Koh, Andrew & Shepherd, Simon, 2010. "Pricing, capacity and long-run cost functions for first-best and second-best network problems," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 870-885, August.
    16. Tan, Zhijia & Yang, Hai, 2012. "Flexible build-operate-transfer contracts for road franchising under demand uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 46(10), pages 1419-1439.
    17. de Palma, André & Lindsey, Robin, 2007. "Chapter 2 Transport user charges and cost recovery," Research in Transportation Economics, Elsevier, vol. 19(1), pages 29-57, January.
    18. Omid M. Rouhani, 2016. "Next Generations of Road Pricing: Social Welfare Enhancing," Sustainability, MDPI, Open Access Journal, vol. 8(3), pages 1-15, March.
    19. Xiao, Feng & Yang, Hai & Han, Deren, 2007. "Competition and efficiency of private toll roads," Transportation Research Part B: Methodological, Elsevier, vol. 41(3), pages 292-308, March.
    20. Kockelman, Kara M. & Lemp, Jason D., 2011. "Anticipating new-highway impacts: Opportunities for welfare analysis and credit-based congestion pricing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(8), pages 825-838, October.
    21. Astrid Gühnemann & Andrew Koh & Simon Shepherd, 2016. "Optimal Charging Strategies under Conflicting Objectives for the Protection of Sensitive Areas: A Case Study of the Trans-Pennine Corridor," Networks and Spatial Economics, Springer, vol. 16(1), pages 199-226, March.
    22. Tsai, Jyh-Fa & Chu, Chih-Peng, 2010. "Analysis of the optimal length of road expansion - A case study of the Taipei metropolitan area," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(3), pages 147-158, March.
    23. Andrew Koh & Simon Shepherd & Agachai Sumalee, 2009. "Second best toll and capacity optimisation in networks: solution algorithm and policy implications," Transportation, Springer, vol. 36(2), pages 147-165, March.
    24. repec:eee:transb:v:102:y:2017:i:c:p:105-123 is not listed on IDEAS

    More about this item

    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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