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A Nash bargaining solution to models of tax and investment competition: tolls and investment in serial transport corridors

Author

Listed:
  • Bruno De Borger

    (University of Antwerp)

  • Wilfried Pauwels

    (University of Antwerp)

Abstract

The purpose of this paper is to study toll and investment competition along a serial transport corridor competition allowing for partial cooperation between regional governments. Partial cooperation is modeled as a Nash bargaining problem with endogenous disagreement points. We show that the bargaining approach to partial cooperation implies lower tolls and higher quality and capacity investment than fully non-cooperative behavior. Moreover, under bargaining, strategic behavior at the investment stage induces regions to offer lower quality and invest less in capacity as compared to full cooperation. Finally, Nash bargaining partially resolves the problem of welfare losses due to toll and capacity competition pointed out in the recent literature.

Suggested Citation

  • Bruno De Borger & Wilfried Pauwels, 2010. "A Nash bargaining solution to models of tax and investment competition: tolls and investment in serial transport corridors," Working Papers 2010/1, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2010-1
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    References listed on IDEAS

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    Cited by:

    1. 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.

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    More about this item

    Keywords

    Nash bargaining; tax competition; congestion pricing;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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