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US Highway Privatization and Heterogeneous Preferences

Author

Listed:
  • Clifford Winston
  • Jia Yan

    (School of Economic Sciences, Washington State University)

Abstract

We assess the welfare effects of highway privatization accounting for government’s behavior in setting the sale price, firms’ strategic behavior in setting tolls in various competitive environments, and motorists’ heterogeneous preferences for speedy and reliable travel. We conclude motorists can benefit from privatization if they are able to negotiate aggressively with a private provider to obtain tolls and service that align with their varying preferences. Surprisingly, motorists are likely to be better off negotiating with a monopolist than with duopoly providers or under public-private competition. Toll regulation may be counterproductive because it would treat motorists as homogeneous. Revised June 2009.

Suggested Citation

  • Clifford Winston & Jia Yan, 2008. "US Highway Privatization and Heterogeneous Preferences," Working Papers 2008-20, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:yan-2
    as

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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/Yan/RoadsPaper_WP2008-20_6-16-09.pdf
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    References listed on IDEAS

    as
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    Keywords

    Security Breach Costs; Financial Distress; Insurance; Resource Allocation.;
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