Pricing, Investment, and Network Equilibrium

84th Annual Meeting of Transportation Research Board, 2005

31 Pages Posted: 27 Jan 2011

See all articles by Lei Zhang

Lei Zhang

Oregon State University

David Matthew Levinson

affiliation not provided to SSRN

Date Written: January 9, 2005


Despite rapidly emerging innovative road pricing and investment principles, the development of a long run network dynamics model for necessary policy evaluation is still lagging. This research endeavors to fill this gap and models the impacts of road financing policies throughout the network equilibration process. The manner in which pricing and investment jointly shape network equilibrium is particularly important and explored in this study. The interactions among travel demand, road supply, revenue mechanisms and investment rules are modeled at the link level in a network growth simulator. After assessing several measures of effectiveness, the proposed network growth model is able to evaluate the short- and long-run impacts of a broad spectrum of road pricing and investment policies on large-scale road networks, which can provide valuable information to decision-makers such as the implications of various policy scenarios on social welfare, financial situation of road authorities and potential implementation problems. Some issues hard to address in theoretical analysis can be examined in the agent-based simulation model. As a demonstration, we apply the network growth model to assess marginal and average pricing scenarios on a sample network. Even this relatively simple application provides new insights into issues around road pricing that have not previously been seriously considered. For instance, the results disclose a potential problem of over-investment when the marginal cost pricing scheme is adopted in conjunction with a myopic profit-neutral investment policy.

Keywords: Transportation network equilibrium, Road growth, Pricing, Congestion toll, Investment, Transport policy analysis

JEL Classification: R40, R41, C15, R42

Suggested Citation

Zhang, Lei and Levinson, David Matthew, Pricing, Investment, and Network Equilibrium (January 9, 2005). 84th Annual Meeting of Transportation Research Board, 2005. Available at SSRN:

Lei Zhang

Oregon State University ( email )

Bexell Hall 200
Corvallis, OR 97331
United States

David Matthew Levinson (Contact Author)

affiliation not provided to SSRN

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