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Competition between highway operators: Can we expect toll differentiation?

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  • Paul Calcott
  • Shuntian Yao

Abstract

. Where there are alternative roads to the same destination, competition between profit maximising road operators is possible. Tolls on such roads could perform two welfare‐enhancing functions: they discourage excessive driving and allocate drivers between roads. The second of these functions operates when some roads are more expensive to drive on, and less congested, than others. The Bertrand equilibrium will not always perform this second function; it may fail to allocate the most impatient drivers to less congested roads, as it does not always deliver toll differentiation. The performance of this second function is dependent on the first. That is, whether or not competing roads will be differentiated by tolls, and congestion will depend in part on the importance of discouraging marginal drivers. The equilibrium will not generally be fully efficient, but will often provide efficiency gains over other decentralised options.

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  • Paul Calcott & Shuntian Yao, 2005. "Competition between highway operators: Can we expect toll differentiation?," Papers in Regional Science, Wiley Blackwell, vol. 84(4), pages 615-626, November.
    • Handle: RePEc:bla:presci:v:84:y:2005:i:4:p:615-626
    DOI: 10.1111/j.1435-5957.2005.00043.x
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    References listed on IDEAS

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    1. Verhoef, E.T. & Small, K.A., 1999. "Product Differentiation on Roads Second-Best Congestion Pricing with Heterogeneity under Public and Private Ownership," Papers 99-00-01, California Irvine - School of Social Sciences.
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    Cited by:

    1. Clifford Winston, 2013. "On the Performance of the U.S. Transportation System: Caution Ahead," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 773-824, September.
    2. Clifford Winston & Jia Yan, 2008. "US Highway Privatization and Heterogeneous Preferences," Working Papers 2008-20, School of Economic Sciences, Washington State University.
    3. van den Berg, Vincent A.C. & Verhoef, Erik T., 2012. "Is the travel time of private roads too short, too long, or just right?," Transportation Research Part B: Methodological, Elsevier, vol. 46(8), pages 971-983.
    4. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road supply in networks with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 430-443.
    5. André de Palma & Robin Lindsey & Fang Wu, 2008. "Private Operators and Time-of-Day Tolling on a Congested Road Network," Journal of Transport Economics and Policy, University of Bath, vol. 42(3), pages 397-433, September.
    6. Winston, Clifford & Yan, Jia, 2011. "Can privatization of U.S. highways improve motorists' welfare?," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 993-1005, August.

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