Pricing, Capacity Choice and Financing in Transportation Networks

Tinbergen Institute Discussion Paper No. 03-027/3

28 Pages Posted: 9 Jun 2003

See all articles by Erik T. Verhoef

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics; Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: March 17, 2003

Abstract

This paper explores the interrelations between pricing, capacity choice and financing in transportation networks. It builds on the famous Mohring-Harwitz result on self-financing of optimally designed roads under optimal congestion pricing, and specifically investigates its ins and outs in a network environment and under various types of second-best regulation. The paper develops a small network model, with endogenous car-ownership, in order to study these questions both from an analytical and a numerical viewpoint. It is for instance shown that application of the principle over an entire network may cause user prices to increase more strongly in initially mildly congested areas compared to heavily congested areas, and that a flat kilometre charge, provided accompanied with optimal capacity policies, may result in first-best efficiency gains.

Keywords: Traffic congestion, Road pricing, Road capacity choice

JEL Classification: R41, R48, D62

Suggested Citation

Verhoef, Erik T. and Rouwendal, Jan, Pricing, Capacity Choice and Financing in Transportation Networks (March 17, 2003). Tinbergen Institute Discussion Paper No. 03-027/3. Available at SSRN: https://ssrn.com/abstract=392036 or http://dx.doi.org/10.2139/ssrn.392036

Erik T. Verhoef (Contact Author)

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 020 4446094 (Phone)
+31 020 4446004 (Fax)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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