Network development under a strict self-financing constraint

André de Palma (), Stef Proost and Saskia Van Der Loo

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: This paper offers a stylized model in which an agency is in charge of investing in road capacity and maintain it but cannot use the capital market so that the only sources of funds are the toll revenues. We call this the strict self-financing constraint in opposition to the traditional self financing constraint where implicitly 100% of the investment needs can be financed by loans. Two stylised problems are analysed: the one link problem and the problem of two parallel links with one link untolled. The numerical illustrations show the cost of the strict self-financing constraint as a function of the importance of the initial infrastructure stock, the rate of growth of demand, the price elasticity of demand and the flexibility in the pricing instruments.

Keywords: Cost-benefit analysis; road tolling; self-financing; infrastructure investments; congestion; bottleneck model. (search for similar items in EconPapers)
JEL-codes: L91 R40 R42 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-ure
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Related works:
Journal Article: Network Development Under a Strict Self-Financing Constraint (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces0829

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