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on Transport Economics |
| By: | Adriaan Hendrik van der Weijde (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam); Vincent van den Berg (VU University Amsterdam) |
| Abstract: | We analyse the behaviour of market participants in a multi-modal commuter network where roads are not priced, but public transport has a usage fee, which is set while taking the effects on the roads into account. In particular, we analyse the difference between markets with a monopolistic public transport operator, which operates all public transport links, and markets in which separate operators own each public transport link. To do so, we consider a simple transport network consisting of two serial segments and two parallel congestible modes of transport. We obtain a reduced form of the public transport operator's optimal fare setting problem and show that, even if the total travel demand is inelastic, serial Bertrand-Nash competition on the public transport links leads to different fares than a serial monopoly; a result not observed in a static model. This results from the fact that trip timing decisions, and therefore the generalized prices of all commuters, are influenced by all fares in the network. We then use numerical simulations to show that, contrary to the results obtained in classic studies on vertical competition, monopolistic fares are not always higher than duopolistic fares; the opposite can also occur. We also explore how different parameters influence the price differential, and how this affects welfare. |
| Keywords: | Public transport, congestion, market structure, market design |
| JEL: | L10 L92 R41 R48 |
| Date: | 2012–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012116&r=tre |
| By: | Beria, Paolo; Grimaldi, Raffaele |
| Abstract: | The removal of infrastructure bottlenecks is widely considered among the most profitable interventions, in socio-economic terms, and rail transport is not an exception. However, as outlined for example by RailPAG (2005), the measurement of the related benefits is difficult and no specific manuals indications seem to exist. From a general point of view, by removing a rail bottleneck we expect at least two kinds of benefits: direct benefits to transport users and external benefits to the rest of society (environmental externalities, accidents and congestion) due to the avoidance of possible shift to more impactful transport modes. The first effect is particularly hard to correctly evaluate, especially without a complete transport model, and thus CBAs currently performed might often result biased. The aim of this paper is to propose a simplified approach to estimate the effects of a capacity constraints for a simple rail network, and assess its removal through a CBA. In the first part, we briefly analyse the transport economics literature on the issue. In the following we introduce the proposed methodology, based on the use of a standard logit model, to measure the rail users’ generalised costs with and without the capacity constraint, and the consequent users and social surplus variation. The model is specified initially for a single link and then extended to a more complex network. Then, we outline the other elements to be included into a CBA in addition to surplus variation: rail service performance improvements, external costs associated to road shift and possible wider economic effects. We also discuss the effect of regulation in the distribution of calculated surplus variations. |
| Keywords: | Cost Benefit Analysis; bottleneck; rail; saturation; assessment; infrastructure |
| JEL: | D61 R41 R42 |
| Date: | 2013–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46889&r=tre |
| By: | Sergejs Gubins (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam) |
| Abstract: | We consider a monocentric city where a traffic bottleneck is located at the entrance of the central business district. The commuters' choices of the departure times from home, residential location, and lot size, are all endogenous. We show that elimination of queuing time under optimal road pricing induces individuals to spend more time at home and to have larger houses, causing urban sprawl. This is opposite to the typical results of urban models with static congestion, which predict cities to become denser with road pricing. |
| Keywords: | dynamic traffic congestion, urban equilibrium, road pricing, bottleneck model, monocentric model |
| JEL: | D62 R21 R41 R48 |
| Date: | 2012–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012137&r=tre |
| By: | Ioannis Tikoudis (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam); Jos N. van Ommeren (VU University Amsterdam) |
| Abstract: | This paper explores the interactions between congestion pricing and a tax-distorted labor market within a monocentric urban equilibrium model. We compute the efficiency gains of various second-best policies, i.e. combinations of toll schemes and revenue recycling programs, with a predetermined level of public revenue. We find that 35% of the space-varying road tax does not reflect marginal external congestion costs, but rather functions as a Ramsey-Mirrlees tax, i.e. an efficiency enhancing mechanism allowing space differentiation of the labor tax. Such a space-varying tax adds a quite different motivation to road pricing, since it can produce large welfare gains even in the absence of congestion. We show that both a cordon toll and a flat kilometer tax achieve over 80% of these gains when combined with specific types of revenue recycling, such as labor tax cuts or public transport subsidies. Sensitivity analysis shows that the optimal type of revenue recycling depends on the level of inefficiency in the provision of public transport prior to the introduction of congestion pricing. |
| Keywords: | Second-best road pricing, revenue recycling, monocentric city |
| JEL: | R41 R48 H23 H76 J20 R13 R14 |
| Date: | 2013–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2013031&r=tre |
| By: | Hugo E. Silva (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam); Vincent A.C. van den Berg (VU University Amsterdam) |
| Abstract: | This paper analyzes airlines' strategic interactions and airport efficient pricing, with a deterministic bottleneck model of congestion, in Cournot-Nash competition and in sequential competition where a Stackelberg leader interacts with perfectly competitive airlines. We show that the internalization of self-imposed congestion by non-atomistic carriers is consistent with earlier literature based on static models of congestion, but the congestion tolls are not. The tolls derived for fully atomistic airlines achieve the social optimum, when charged to all carriers, in the simultanous setting as well as in the sequential setting. We also find that alternative efficient pricing schemes exist for the sequential competition between a dominant airline and a competitive follower. The analysis suggests that airport congestion pricing has a more signicant role than what previous studies have suggested. Moreover, the financial deficit under optimal pricing may be less severe than what earlier studies suggest, as congestion toll revenues may cover optimal capacity investments. Political feasibility would be enhanced as ecient congestion charges do not depend on market shares and therefore may not be perceived as inequitable. |
| Keywords: | Airport pricing, Congestion, Bottleneck model |
| JEL: | H23 L50 L93 R48 |
| Date: | 2012–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012056&r=tre |
| By: | Paul Koster (VU University Amsterdam); Eric Pels (VU University Amsterdam); Erik Verhoef (VU University Amsterdam) |
| Abstract: | We derive the expected user costs of US domestic air travel delay variability taking into account scheduling behavior of travelers. Travelers do not only consider mean arrival delays, but also face scheduling costs because they arrive too early or too late at their destination. The model allows travelers to anticipate arrival delay variability by choosing an earlier flight. We show that the expected user costs of US air traffic delays are underestimated by 16% if arrival delay variability is ignored. |
| Keywords: | air traffic delay, travel time variability, scheduling, value of reliability |
| JEL: | R4 |
| Date: | 2013–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2013056&r=tre |
| By: | Maria Dementyeva (VU University Amsterdam); Paul R. Koster (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam) |
| Abstract: | Accident externalities are among the most important external costs of road transport. We study the regulation of these when insurance companies have market power. Using analytical models, we compare a public-welfare maximizing monopoly with a private profit-maximizing monopoly, and markets where two or more firms compete. A central mechanism in the analysis is the accident externality that individual drivers impose on one another via their presence on the road. Insurance companies will internalize some of these externalities, depending on their degree of market power. We derive optimal insurance premiums, and "manipulable" taxes that take into account the response of the firm to the tax rule applied by the government. Furthermore, we study the taxation of road users under different assumptions on the market structure. We illustrate our analytical results with numerical examples, in order to better understand the determinants of the relative performance of different market structures. |
| Keywords: | accident externalities, traffic regulation, safety, second-best, market power |
| JEL: | D43 D62 R41 R48 |
| Date: | 2013–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2013019&r=tre |
| By: | Bruno de Borger (University of Antwerp); Jan Rouwendal (VU University Amsterdam) |
| Abstract: | We study the impact of fuel taxes and kilometer taxes on households' choices of vehicle quality, on their demand for kilometers driven, and on fuel consumption. Moreover, embedding this information in a model of the car market, we analyze the implications of these taxes for the opportunity costs of owning cars of different quality. Higher quality raises the fixed cost of car ownership, but it may raise (engine size, acceleration speed, etc.) or reduce (fuel technology, etc.) the variable user cost. Our results show that kilometer charges and fuel taxes have very different implications. For example, a higher fuel tax raises household demand for more fuel efficient cars, provided that the demand for car use is inelastic; it reduces the demand for characteristics that raise variable user costs. Surprisingly, however, a kilometer tax unambiguously reduces the demand for more fuel efficient cars. Incorporating price adjustments at the market level, we find th at fuel taxes raise the <I>marginal</I> fixed opportunity cost of better fuel efficiency at all quality levels. <I>Total</I> annual opportunity costs of owning highly fuel efficient cars increase, while they decline for cars of low fuel efficiency. We further find that both a fuel tax and a kilometer charge reduce the <I>total</I> annual fixed ownership cost for car attributes that raise the variable cost of driving (engine power, acceleration speed, etc.). There is thus in general a trade-off between fixed and variable car costs: if the latter increase - due to higher fuel prices or a kilometer charge - total demand for cars decreases and a return to equilibrium is only possible by a decrease in fixed costs. All theoretical results are illustrated using a numerical version of the model. The analysis shows that modeling the effect of tax changes on household behavior alone can produce highly misleading results. |
| Keywords: | car market, car quality, fuel tax, kilometer charge, market equilibrium |
| JEL: | H22 L62 |
| Date: | 2012–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012122&r=tre |
| By: | Roberto Bonfatti (University of Nottingham); Steven Poelhekke (VU University Amsterdam, and De Nederlandsche Bank) |
| Abstract: | Mine-related transport infrastructure specializes in connecting mines to the coast, and not so much to neighboring countries. This is most clearly seen in developing countries, whose transport infrastructure was originally designed to facilitate the export of natural resources in colonial times. We provide first econometric evidence that mine-to-coast transport infrastructure matters for the pattern of trade of developing countries, and can help explaining their low level of regional integration. The main idea is that, to the extent that it can be used not just to export natural resources but also to trade other commodities, this infrastructure may bias a country's structure of transport costs in favor of overseas trade, and to the detriment of regional trade. We investigate this potential bias in the context of a gravity model of trade. Our main findings are that coastal countries with more mines import less than average from their neighbors, and this effect is s tronger when the mines are located in such a way that the related infrastructure has a stronger potential to affect trade costs. Consistently with the idea that this effect is due to mine-to-coast infrastructure, landlocked countries with more mines import less than average from their non-transit neighbors, but more then average from their transit neighbors. Furthermore, this effect is specific to mines and not to oil and gas fields, arguably because pipelines cannot possibly be used to trade other commodities. We discuss the potential welfare implications of our results, and relate these to the debate on the economic legacy of colonialism for developing countries. |
| Keywords: | Mineral Resources, Transport Infrastructure, Regional Trade Integration, Gravity Model, Economic Legacy of Colonialism |
| JEL: | F14 F54 Q32 R4 |
| Date: | 2013–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2013042&r=tre |
| By: | Adriaan Hendrik van der Weijde (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam); Vincent A. C. van den Berg (VU University Amsterdam) |
| Abstract: | We formulate a horizontal differentiation model with price-sensitive demand and asymmetric transport costs, in the context of transport scheduling. Two competitors choose fares and departure times in a fixed time interval. Consumers are distributed uniformly along the interval; their location indicates their desired departure time. In a standard Hotelling model, locations are chosen before prices. In our context, the opposite order is also conceivable, but we show that it does not result in a Nash equilibrium; the same is true for a game in both variables are chosen simultaneously. We also discuss Stackelberg game structures and second-best regulation. We conclude that the addition of price-sensitive demand results in equilibria in the traditional Hotelling model with price setting; there, services are scheduled closer together than optimal. We also show that it is possible to include asymmetric schedule delay functions. Our results show that departure times can be strategic instruments. Optimal regulatory strategies depend on the value of schedule delay, and on whether the regulator can commit. |
| Keywords: | horizontal differentiation, scheduling, transport |
| JEL: | L11 L51 L91 R40 |
| Date: | 2012–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012119&r=tre |
| By: | Erik T. Verhoef (VU University Amsterdam) |
| Abstract: | The famous Mohring-Harwitz theorem states that, under certain technical conditions, the degree of self-financing of congested infrastructure is equal to the elasticity of the capacity cost function in the optimum, so that under neutral scale economies exact self-financing applies. Although the theorem has been proven to remain valid for various extensions of the basic set-up for which it was originally derived, it breaks down when the infrastructure is used by operators with market power when competing in Cournot fashion, the case in point often being oligopolistic airlines at a congested airport. This paper proposes a regulatory scheme, not involving lump-sum payments or budget constraints in the optimal pricing problem, that restores self-financing for congested infrastructure for this market form. What is more, under the proposed scheme, exact self-financing applies independent of the elasticity of the capacity cost function. The result remains true both for the case where operators treat the tolls parametrically, and for 'manipulable' tolls, designed to account for the fact that operators with market power can be expected to be aware of, and exploit, the fact that toll are not truly parametric, but instead depend on their own behaviour. |
| Keywords: | Congestion pricing, capacity choice, self-financing infrastructure, market power, airport congestion |
| JEL: | R41 R48 D62 |
| Date: | 2012–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012064&r=tre |
| By: | Deepti Goel (Department of Economics, Delhi School of Economics, Delhi, India); Smriti Sharma (Food and Resource Economics Department, University of Florida, P.O. Box 110240 IFAS Gainesville, FL32611, U.S.A.) |
| Abstract: | In this paper we investigate the effect of the Delhi Metro, an intra-city mass rail transit system, on air pollution within Delhi. To identify effects on pollution, we exploit the discontinuous jumps in metro ridership, each time the network is extended. Our identifying assumption is that in the absence of the extension there would be a smooth transition in pollution levels. We find strong evidence to show that the Delhi Metro has resulted in reductions of two important vehicular emissions, namely, nitrogen dioxide and carbon monoxide. We estimate a cumulative impact of a 35 percent reduction in CO levels for the region around ITO (a major traffic intersection in Delhi). This is suggestive of a traffic diversion effect, where people are switching from private modes of travel to the Delhi Metro. Given, documented evidence on the adverse health effects of air pollution, our findings suggest that these indirect benefits must be considered in any cost-benefit analysis of a rapid mass transport system. |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:229&r=tre |
| By: | Stefanie Peer (VU Amsterdam); Erik T. Verhoef (VU Amsterdam) |
| Abstract: | We consider equilibrium and optimum use of a Vickrey road bottleneck, distinguishing between long-run and short-run scheduling preferences in an otherwise stylized scheduling model. The preference structure reflects that there is a distinction between the (exogenous) 'long-run preferred arrival time', which would be relevant if consumers were unconstrained in the scheduling of their activities, versus the 'short-run preferred arrival time', which is the result of an adaptation of travel routines in the face of constraints caused by, in particular, time-varying congestion levels. We characterize the unpriced equilibrium, the social optimum as well as second-best situations where the availability of the pricing instruments is restricted. All of them imply a dispersed distribution of short-run preferred arrival times. The extent of dispersion in the unpriced equilibrium, however, is higher than socially optimal. |
| Keywords: | bottleneck model; scheduling decisions; travel routines; long-run vs. short-run |
| JEL: | D80 R48 R41 H21 |
| Date: | 2013–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2013028&r=tre |
| By: | Martijn Kobus (VU University Amsterdam); Eva Gutierrez Puigarnau (VU University Amsterdam); Piet Rietveld (VU University Amsterdam); Jos Van Ommeren (VU University Amsterdam) |
| Abstract: | We introduce a methodology to estimate the effect of parking prices on car drivers' choice between street and garage parking. Our key identifying assumption is that the marginal benefit of parking duration does not depend on this choice. The endogeneity of parking duration is acknowledged in the estimation procedure. We apply the methodology to an area where cruising for parking is absent, street parking is ubiquitous and garage parking is discretely located over space. So, in this area, the average distance to the final destination is longer for garage parking than for street parking. We find that drivers are willing to pay a premium for street parking which ranges from euro 0.35 to euro 0.58. Given a parking duration of one hour, we find that the demand for street parking is extremely price elastic: the price elasticity of demand for the share of street parking is -4. However, the price elasticity is much smaller for shorter parking durations. Our estimates imply that even small reductions in street parking prices induce a strong increase in the stock of cars parked on-street. Our estimates also imply that a policy which contains an on-street premium (so street prices exceed garage prices) is welfare improving, because drivers with longer parking durations are induced to use parking locations that are, on average, farther away. |
| Keywords: | street parking; garage parking |
| JEL: | R48 |
| Date: | 2012–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012040&r=tre |
| By: | Jos van Ommeren (VU University Amsterdam); Jesper de Groote (VU University Amsterdam); Giuliano Mingardo (Erasmus University Rotterdam) |
| Abstract: | We estimate welfare losses of policies that provide on-street parking permits to residents almost free of charge in shopping districts. Our empirical results indicate that parking supply is far from perfectly price elastic, implying that there are substantial welfare losses related to under-priced parking permits. Our results suggest that the provision of residential parking permits in shopping districts induces a yearly deadweight loss of at least euro 500 per permit, which is about 30% of the supply cost of a parking place in shopping districts. |
| Keywords: | parking supply; residential parking permit; deadweight loss |
| JEL: | R41 R48 |
| Date: | 2013–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2013059&r=tre |
| By: | Stefan P.T. Groot (VU University Amsterdam); Henri L.F. de Groot (VU University Amsterdam, and Ecorys NEI); Paolo Veneri (OECD, Paris) |
| Abstract: | This study analyses the relation between education and commuting behaviour of Dutch workers. Results show that, ceteris paribus, higher educated workers commute further, both in terms of distance and time. In addition, higher educated workers are more frequent users of public transport and of bicycles. Furthermore, we find that higher educated workers are relatively more likely to commute towards agglomerated areas and areas that pay relatively high wages, while they are more likely to live in and commute from areas with higher land rents. |
| Keywords: | commuting, education, urban amenities, agglomeration |
| JEL: | R12 R21 R23 |
| Date: | 2012–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012080&r=tre |
| By: | Vincent A.C. van den Berg (VU University Amsterdam) |
| Abstract: | This paper investigates regulation by auctions of private supply of congestible infrastructures in two networks settings: 1) two serial facilities, where the consumer has to use both in order to consume; and 2) two parallel facilities that are imperfect substitutes. There are four market structures: a monopoly and 3 duopolies that differ in how firms interact. The effects of an auction depend on what the bidders compete. With a transfer auction, the bidders compete on how much money they transfer to the government. This auction leads to the same outcome as the game without an auction (for a given market structure), since this gives the maximum profit to transfer. An auction on the capacity of a facility leads to an even lower welfare than no auction, because firms set very high capacities and usage fees. Conversely, an auction on the generalised price or number of users leads to the first-best outcome. Moreover, these two auctions are robust: they attain the first-best regardless of whether the facilities are auctioned off to a single firm or to two, and for all market and network structures. On the contrary, the performances (relative to the first-best) of the transfer and capacity auctions strongly depend on these considerations. |
| Keywords: | private supply, congestible facilities, auctions, serial facilities, parallel facilities, imperfect substitutes |
| JEL: | D43 L13 L51 R41 R42 |
| Date: | 2012–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012087&r=tre |
| By: | Luis Cabral; Zhu Wang; Daniel Yi Xu |
| Abstract: | Taking the early U.S. automobile industry as an example, we evaluate four competing hypotheses on regional industry agglomeration: intra-industry local externalities, inter-industry local externalities, employee spinouts, and location fixed-effects. Our findings suggest that inter-industry spillovers, particularly the development of the carriage and wagon industry, play an important role. Spinouts play a secondary role and only contribute to agglomeration at later stages of industry evolution. The presence of other firms in the same industry has a negligible (or maybe even negative) effect on agglomeration. Finally, location fixed-effects account for some agglomeration, though to a lesser extent than inter-industry spillovers and spinouts. |
| Keywords: | Economic growth ; Regional economics ; Automobile industry and trade |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:13-04&r=tre |
| By: | Zakariah, Sahidah; Pyeman, Jaafar |
| Abstract: | Background: Logistics cost is an important factor affecting the competitiveness on both macro (national) and micro level (firms). Logistics cost indicates the performance of logistics industry, efficiency level and its competitiveness. Research Problem: Despite of its significance, current state of logistics cost accounting and management in Malaysia has not properly addressed and the issues surround logistics cost measurement remains incoherent. Aim of research: The purpose of this study is to give an overview of the current state and issues of logistics cost accounting and management in Malaysia. Research Method: This study used content analysis as a qualitative research tool, and supported by literature material with regards the concerned research tool. Findings: This study has found the importance of having standard logistics cost accounting measurement, which plays a vital role in determining the accuracy of the logistics cost and ascertain the efficiency level of logistics industry in Malaysia. Implication: This study leads to trigger the awareness of current state and issues of logistics cost accounting and management in Malaysia. |
| Keywords: | logistics cost; logistics cost accounting; cost management |
| JEL: | G0 R4 R59 |
| Date: | 2013–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46605&r=tre |
| By: | Vincent van den Berg (VU University Amsterdam) |
| Abstract: | Consider a government tendering the right to operate, for example, an airport, telecommunication network, or utility. There is an 'incumbent bidder' who owns a complement or substitute facility, and one entering 'new bidder'. With a 'standard auction' on the payment to the government, the incumbent is willing to bid higher than its expected profit from the facility as winning implies that it is a monopolist instead of a duopolist. The incumbent is therefore more likely to win. However, it tends to have a lower expected surplus unless the new bidder can never win, which occurs with 'private values' when the facilities are strong complements or substitutes and always with 'common values'. The 'standard auction' leads to an unregulated outcome which hurts consumers as tendered facilities tend to have limited competition. The government could improve the outcome by endogenously regulating using a 'price auction' on the price to be a sked to consumers. Now, it depends who is advantaged: with complements, the incumbent bids below its marginal cost and is more likely to win; with substitutes, it bids above and is less likely to win. The same effects occur in auctions on service quality or number of users. In many settings, the advantaged bidder always wins, and this can greatly affect the competition for the field. |
| Keywords: | tendering, overbidding, advantaged bidders, network markets |
| JEL: | D43 D44 L51 R42 |
| Date: | 2013–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2013033&r=tre |
| By: | Emmanouil Tranos (VU University Amsterdam); Karima Kourtit (VU University Amsterdam); Peter Nijkamp (VU University Amsterdam) |
| Abstract: | The majority of cities in our world is not only connected through conventional physical infrastructure, but increasingly through modern digital infrastructure. This paper aims to test whether digital connectivity leads to other linkage patterns among world cities than traditional infrastructure. Using a generalized spatial interaction model, this paper shows that geography (and distance) still matters for an extensive set of world cities analysed in the present study. With a view to the rapidly rising urbanization in many regions of our world, the attention is next focused on the emerging large cities in China in order to test the relevance of distance frictions - next to a broad set of other important explanatory variables - for digital connectivity in this country. Various interesting results are found regarding digital connectivity within the Chinese urban system, while also here geography appears to play an important role. |
| Keywords: | Digital Networks, Internet, Connectivity, World Cities, Death of Distance, Centrality, Small-World Networks, Clustering, Gravity Model |
| JEL: | O18 H54 P25 |
| Date: | 2012–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012124&r=tre |
| By: | Vincent van den Berg (VU University Amsterdam) |
| Abstract: | Consider a government that auctions a franchise for, e.g., an airport, telecommunication network, or utility. Consider an 'incumbent bidder' that owns a complement or substitute. With an auction on the transfer (i.e. payment) to the government, the incumbent is advantaged.If the government regulates the market with an auction on the price asked to consumers, it depends who is advantaged. With complements, the incumbent is advantaged: it can set a lower price on the new franchise, as this increases the profit of the other. With substitutes, the incumbent is disadvantaged. In many settings, the advantage bidder always wins. |
| Keywords: | Franchising, auctions, advantaged bidders, incumbent, private supply, regulatory auctions |
| JEL: | D43 L13 L51 R41 R42 |
| Date: | 2012–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:2012117&r=tre |