The Economics of Road Network Ownership: An Agent-Based Approach

ABSTRACT

This paper explores the economic impact of alternative ownership structures on transportation system performance, social welfare, and regulatory needs. Road pricing, investment, and ownership decisions are jointly considered in an agent-based evolutionary model applicable to large networks. Results suggest that a centralized public regime with average-cost pricing is far from socially optimal with even moderate demand growth. When properly regulated, a completely privatized transportation network could achieve net social benefits close to the theoretical optimum and distribute a high percentage of welfare gains to travelers. But an unregulated private road economy would suffer from higher-than-optimal tolls and overinvestment.

Key Words:

• network economics
• privatization
• road pricing
• simulation of network evolution
• transportation financing

ACKNOWLEDGMENTS

The authors would like to thank the guest editor and an anonymous reviewer for their thorough technical and editorial comments on the paper. The Kiewit Center for Infrastructure and Transportation at the Oregon State University has provided partial financial support for this research. The authors are solely responsible for all statements in this paper.

Notes

CRS: Constant Return to Scale; DRS: Decreasing Return to Scale.