Private roads, competition, and incentives to adopt time-based congestion tolling

Abstract This paper investigates whether time-based congestion tolling is profitable for a private toll road operator when competing for traffic with another road. Despite the fact that congestion tolling boosts revenue by reducing congestion delay it can be unprofitable if it induces a private or public toll road rival to reduce its toll severely. The size of the rival's response depends on the price elasticity of travel demand and on whether the rival also employs congestion tolling. In a private duopoly adoption may be unilaterally profitable, but parallel adoption unprofitable, so that a Prisoner's Dilemma obtains.

[1]  R. Lindsey,et al.  Private toll roads: Competition under various ownership regimes , 2000 .

[2]  André de Palma,et al.  Congestion and Game in Capacity: a Duopoly Analysis in the Presence of Network Externalities , 1989 .

[3]  D. Bernstein,et al.  UNDERSTANDING THE COMPETING SHORT-RUN OBJECTIVES OF PEAK PERIOD ROAD PRICING , 1993 .

[4]  André de Palma,et al.  A Game-Theoretic Approach to the Analysis of Simple Congested Networks , 1992 .

[5]  C. Willoughby,et al.  Singapore's motorization policies 1960-2000 , 2001 .

[6]  D. Reitman.  Endogenous Quality Differentiation in Congested Markets , 1991 .

[7]  Thomas R. Saving,et al.  COMPETITION AND HIGHWAY PRICING FOR STOCHASTIC TRAFFIC , 1980 .

[8]  Peter Nijkamp,et al.  Private sector involvement in financing and operating transport infrastructure , 1995 .

[9]  J. Laffont,et al.  Network Competition: II. Price Discrimination , 1998 .

[10]  PROFIT MAXIMIZATION, COST MINIMIZATION AND PRICING FOR CONGESTION-PRONE FACILITIES , 1985 .

[11]  Xuehao Chu,et al.  Alternative congestion pricing schedules , 1999 .

[12]  K. Corts,et al.  Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment , 1998 .

[13]  G. Norman,et al.  PRODUCT DIFFERENTIATION, PRICING POLICY AND EQUILIBRIUM* , 1993 .

[14]  Strategic entry deterrence through spatial price discrimination , 1998 .

[15]  Kenneth A. Small,et al.  Road Pricing for Congestion Management: The Transition from Theory to Policy - eScholarship , 1998 .

[16]  J. Geanakoplos,et al.  Multimarket Oligopoly: Strategic Substitutes and Complements , 1985, Journal of Political Economy.

[17]  X. Vives,et al.  On the Strategic Choice of Spatial Price Policy , 1998 .

[18]  Paul Seidenstat,et al.  Privatizing transportation systems , 1996 .

[19]  John R. Meyer,et al.  Going Private: The International Experience with Transport Privatization , 1994 .

[20]  George Norman,et al.  Technology choice and market structure: strategic aspects of flexible manufacturing , 2003 .

[21]  Ralph M. Braid,et al.  Peak-Load Pricing of a Transportation Route with an Unpriced Substitute , 1996 .

[22]  Kenneth A. Small,et al.  THE SCHEDULING OF CONSUMER ACTIVITIES: WORK TRIPS , 1982 .

[23]  Rune Steinbacka,et al.  Time-Based Competition and the Privatization of Services , 1995 .

[24]  A. Palma,et al.  Economics of a bottleneck , 1986 .

[25]  Kenneth A. Small,et al.  Optimal Peak-Load Pricing, Investment, and Service Levels on Urban Expressways , 1977, Journal of Political Economy.

[26]  Ralph A. Winter.  Colluding on Relative Prices , 1997 .

[27]  A. Palma,et al.  A STRUCTURAL MODEL OF PEAK-PERIOD CONGESTION: A TRAFFIC BOTTLENECK WITH ELASTIC DEMAND. IN: RECENT DEVELOPMENTS IN TRANSPORT ECONOMICS , 1993 .

[28]  Alexander Galetovic,et al.  Highway Franchising: Pitfalls and Opportunities , 1997 .

[29]  E. Silva.  À-la-Carte or Smorgasbord? Multiproduct Clubs with Costly Exclusion , 1997 .

[30]  W. Vickrey.  Congestion Theory and Transport Investment , 1969 .

[31]  John F. McDonald,et al.  Economic efficiency of second-best congestion pricing schemes in urban highway systems , 1999 .

[32]  P. Nijkamp,et al.  SECOND BEST CONGESTION PRICING: THE CASE OF AN UNTOLLED ALTERNATIVE. IN: URBAN TRANSPORT , 1996 .

[33]  Sten Nyberg,et al.  Vanity and Congestion: A Study of Reciprocal Externalities , 1996 .

[34]  Kenneth Button,et al.  Road pricing, traffic congestion and the environment : issues of efficiency and social feasibility , 1998 .

[35]  S. Scotchmer,et al.  Two-Tier Pricing of Shared Facilities in a Free-Entry Equilibrium , 1985 .