On the change in surpluses equivalence: measuring benefits from transport infrastructure investments

Jose Melendez-Hidalgo, Piet Rietveld and Erik Verhoef

European Transport \ Trasporti Europei, 2007, issue 36, 107-140

Abstract: Reductions in transport costs resulting from infrastructure improvements generate benefits that can be measured as surplus changes either at an economy-wide scale (social welfare changes) or, as is common practice in cost-benefit analysis (CBA), at a transport market level as transport users’ surplus changes. In this paper we look at an economy with spatially separated markets embedded in a transport network (a spatial price equilibrium model) to study the equivalence between these two benefit measures. Three different product market competition arrangements are considered. A similar question and strategy is presented in Jara-Diaz (1986) employing a two-node network and extreme competition assumptions on the production side: perfect competition and monopolistic production with arbitrage. We extend his work by additionally considering perfect collusion (monopoly without resale) and Cournot-Nash oligopoly under flow-dependent transport costs (i.e. congestion in transport). Numerical simulations in a three-node network with and without transshipment nodes, illustrate our main results.

Keywords: Cost-benefit analysis; Indirect benefits (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sot:journl:y:2007:i:36:p:107-140

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