01657869

Component

This paper studies capacity and pricing decisions for private roads in a simple network, which consists of multiple complements or substitutes. The authors model the interactions among firms as in a general oligopoly market with demand determined by such simple network. To simplify the model, each road segment is assumed to be owned by one firm. The authors begin the paper by describing the effects of tolling and capacity decisions on social welfare, and on private profits. By comparing incentives for private firms and government, they come up with a intuitive but important theorem that government, a social welfare maximizer, have lower incentive to increase toll but higher incentive to increase capacity than "union of private firms", a aggregate profit maximizer. To understand the tradeoffs in the design of stable and efficient franchising mechanisms, the authors then characterize two classes of Pareto Optimal strategies: aggregate optimal and decentralized optimal. The former considers the trade-offs between social welfare and the aggregate private sector profits, whereas the latter takes into account the individual profits. The authors describe the relationship between these two classes of strategies, and show that both perform well in certain situations. Numerical examples validate analytical analysis and illustrate the difference among Pareto optimality under different assumptions.

This paper was sponsored by TRB committee ABE10 Standing Committee on Revenue and Finance.

18-03411

English

15p

2018

Transportation Research Board 97th Annual Meeting

Digital/other

Figures; References

Economic efficiency; Highway capacity; Incentives; Networks; Pricing; Private roads

Pareto optimum

Economics; Highways; Operations and Traffic Management

Transportation Research Board Annual Meeting 2018 Paper #18-03411

TRIS, TRB, ATRI

Jan 8 2018 10:50AM