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Is the travel time of private roads too short, too long, or just right?

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  • van den Berg, Vincent A.C.
  • Verhoef, Erik T.

Abstract

We consider price and service-quality setting in oligopolistic markets for congestible services, applied to the case of private roads. Previous studies show that parallel competitors set a volume/capacity ratio (and thereby a travel time or service quality) that is socially optimal if they take the actions of the others as given. We find that this result does not hold when capacity and toll setting are separate stages—as then firms aim to limit toll competition by setting lower capacities, and thus higher travel times—or when firms set capacities sequentially, as then firms aim to limit the capacities of later entrants by setting higher capacities. In our Stackelberg competition, the last firm to act has no capacity decisions to influence. Hence, it is only concerned with the toll-competition substage, and sets a travel time that is longer than socially optimal. The first firm cares mostly about the competitors’ capacities that it can influence: it sets a travel time that is shorter than socially optimal. The average travel time will be too short from a societal point of view.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:transb:v:46:y:2012:i:8:p:971-983
    DOI: 10.1016/j.trb.2012.04.003
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    Cited by:

    1. Boffa, Federico & Fedele, Alessandro & Iozzi, Alberto, 2023. "Congestion and incentives in the age of driverless fleets," Journal of Urban Economics, Elsevier, vol. 137(C).
    2. Raphaël Lamotte & André de Palma & Nikolas Geroliminis, 2016. "Sharing the road: the economics of autonomous vehicles," Working Papers hal-01281425, HAL.
    3. van den Berg, Vincent A.C., 2013. "Serial private infrastructures," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 186-202.
    4. Lamotte, Raphaël & de Palma, André & Geroliminis, Nikolas, 2017. "On the use of reservation-based autonomous vehicles for demand management," Transportation Research Part B: Methodological, Elsevier, vol. 99(C), pages 205-227.
    5. 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.
    6. Meng, Qiang & Lu, Zhaoyang, 2017. "Quantitative analyses of highway franchising under build-operate-transfer scheme: Critical review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 102(C), pages 105-123.
    7. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road networks with uncertain demand," Research in Transportation Economics, Elsevier, vol. 70(C), pages 57-68.
    8. Chen, Hsiao-Chi & Liu, Shi-Miin, 2016. "Should ports expand their facilities under congestion and uncertainty?," Transportation Research Part B: Methodological, Elsevier, vol. 85(C), pages 109-131.
    9. van den Berg, Vincent A.C., 2012. "Auctions for private congestible infrastructures," MPRA Paper 40103, University Library of Munich, Germany.

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