Title: Toll Road Financing and Optimal Regulation on a General Network
Abstract:With an increasing number of private toll road projects constructed or proposed in the U.S. through various forms of public private partnerships, and with more states removing legal constraints on the...With an increasing number of private toll road projects constructed or proposed in the U.S. through various forms of public private partnerships, and with more states removing legal constraints on the entry of private roads into the existing public road system, there are imperative needs to analyze the welfare and financial implications of utilizing private sector capitals in road financing for both public policy decisions and private investment decisions. This paper considers an existing publicly-owned road network, and develops analytical tools for optimal utilization of private-sector investment resources through the introduction of private toll roads and regulatory policies. Results on a test network show that from a welfare-maximizing point of view, a ceiling toll of $0.21/kilometer on private toll roads produces the optimal price-ceiling regulation. From a user benefit maximization perspective, the optimal ceiling price should be $0.16/km. Under revenue-sharing regulation, social welfare and user benefits are both maximized with a 70% revenue-sharing agreement between the public and private sectors. It is demonstrated that multiple local optima exist in the optima private toll road regulation problems on a general network, which may actually offer the public sector advantages in contracting negotiations. Concession agreements are less effective than revenue-sharing in maximizing user benefits, but are more effective than price-ceiling. Shadow toll is the least effective of all four regulatory tools examined because it creates incentives for over-investment by the private sector.Read More
Publication Year: 2011
Publication Date: 2011-01-01
Language: en
Type: article
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Cited By Count: 1
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