Document Type

Article

Publication Date

2010

Publication Title

Transportation Research: Part B: Methodological

Volume

44

Issue

4

First Page

415

Last Page

433

DOI

10.1016/j.trb.2009.10.002

Keywords

Private road, Road franchising, Pareto-efficiency, Regulation

Abstract

Private provision of public roads through build-operate-transfer (BOT) contracts is increasing around the world. This paper investigates the properties of Pareto-efficient BOT contracts using a bi-objective programming approach under perfect information. Under certain conventional assumptions, we find that for any Pareto-efficient BOT contract: (1) the concession period should be set to be the whole road life; (2) the volume-capacity ratio (or the road service quality) and the average social cost per trip are constantly equal to those at the social optimum whenever there are constant returns to scale in road construction. Extensions are made to the cases with increasing (decreasing) returns to scale in road construction. A variety of regulatory regimes are investigated to analyze the behavior of the profit-maximizing private firm, and efficient regulations, including demand and markup charge regulations, are elucidated for both the public and private sectors to achieve a predetermined Pareto-optimal outcome.

Comments

NOTICE: this is the author’s version of a work that was accepted for publication in Transportation Research Part B: Methodological. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Transportation Research Part B: Methodological 44 (4), 2010 and is available here.

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