The effect of private road supply on the volume/capacity ratio when firms compete Stackelberg in Road Capacity
We study road supply by competing firms between a single origin and destination. In previous studies, firms simultaneously set their tolls and capacities while taking the actions of the others as given in a Nash fashion. Then, under some widely used technical assumptions, firms set the same volume/capacity ratio as a public operator would and thus have the same amount of congestion and travel time. We find that this result does not hold if capacity and toll setting are separate stagesâ€”as then firms want to limit the competition in the toll stage by setting lower capacitiesâ€”or when firms set capacities one after the other in a Stackelberg fashionâ€”as then firms want to limit their competitors' capacities by setting higher capacities. In our Stackelberg competition, the firms that act last have few if any capacity decisions to influence. Hence, they are more concerned with the toll competition substage, and set a higher volume/capacity ratio than the public operator. The firms that act first care more about their competitors' capacities they can influence: they set a lower ratio and have the largest capacities. The average volume/capacity ratio is below the public ratio, and hence the average private travel time is too short. Still, in our numerical model, for three or more firms, welfare is higher under Stackelberg competition than under Nash competition, because of the larger Stackelberg capacity expansion and lower tolls.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- AndrÊ de Palma & Robin Lindsey, 2000. "Private toll roads: Competition under various ownership regimes," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 34(1), pages 13-35.
- Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-653, October.
- Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-370, March.
- Brueckner, Jan K. & Verhoef, Erik T., 2010.
"Manipulable congestion tolls,"
Journal of Urban Economics,
Elsevier, vol. 67(3), pages 315-321, May.
- Jan K. Brueckner & Erik T. Verhoef, 2009. "Manipulable Congestion Tolls," Working Papers 080915, University of California-Irvine, Department of Economics.
- Jan K. Brueckner & Erik T. Verhoef, 2009. "Manipulable Congestion Tolls," Tinbergen Institute Discussion Papers 09-009/3, Tinbergen Institute.
- Verhoef, Erik T., 2007. "Second-best road pricing through highway franchising," Journal of Urban Economics, Elsevier, vol. 62(2), pages 337-361, September.
- Erik T. Verhoef, 2005. "Second-best Road Pricing Through Highway Franchising," Tinbergen Institute Discussion Papers 05-082/3, Tinbergen Institute.
- Edelson, Noel M, 1971. "Congestion Tolls Under Monopoly," American Economic Review, American Economic Association, vol. 61(5), pages 873-882, December.
- Basso, Leonardo J. & Zhang, Anming, 2007. "Congestible facility rivalry in vertical structures," Journal of Urban Economics, Elsevier, vol. 61(2), pages 218-237, March.
- Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
- 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.
- Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
- Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
- Zhang, Anming & Zhang, Yimin, 2006. "Airport capacity and congestion when carriers have market power," Journal of Urban Economics, Elsevier, vol. 60(2), pages 229-247, September.
- Bruno De Borger & Kurt Van Dender, 2005. "Prices, capacities and service quality in a congestible Bertrand duopoly," ERSA conference papers ersa05p221, European Regional Science Association.
- De Borger, Bruno & Van Dender, Kurt, 2005. "Prices, capacities and service quality in a congestible Bertrand duopoly," University of California Transportation Center, Working Papers qt1k51437c, University of California Transportation Center.
- Paul Klemperer, 2004. "What Really Matters in Auction Design, from Auctions: Theory and Practice," Introductory Chapters,in: Auctions: Theory and Practice Princeton University Press.
- Erik T. Verhoef, 2008. "Private Roads: Auctions and Competition in Networks," Journal of Transport Economics and Policy, University of Bath, vol. 42(3), pages 463-493, September.
- Engel Eduardo M & Fischer Ronald & Galetovic Alexander, 2004. "Toll Competition Among Congested Roads," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-21, March.
- Eduardo Engel & Ronald Fischer & Alexander Galetovic, 1999. "Toll Competition Among Congested Roads," NBER Technical Working Papers 0239, National Bureau of Economic Research, Inc.
- Eduardo Engel & Ronald Fischer & Alexander Galetovic, 1999. "Toll competition among congested roads," Documentos de Trabajo 54, Centro de Economía Aplicada, Universidad de Chile.
- F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, Oxford University Press, vol. 38(4), pages 582-606.
- 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.
- Paul Klemperer, 2004. "Survey of Auction Theory, from Auctions: Theory and Practice," Introductory Chapters,in: Auctions: Theory and Practice Princeton University Press.
- De Vany, Arthur & Saving, Thomas R, 1980. "Competition and Highway Pricing for Stochastic Traffic," The Journal of Business, University of Chicago Press, vol. 53(1), pages 45-60, January.
- Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice," Introductory Chapters,in: Auctions: Theory and Practice Princeton University Press. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa11p1203. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.