Can privatization of U.S. highways improve motorists' welfare?

Clifford Winston and Jia Yan

Journal of Public Economics, 2011, vol. 95, issue 7-8, 993-1005

Abstract: We assess the welfare effects of highway privatization accounting for government's behavior in setting the sale price, firms' strategic behavior in setting tolls, and motorists' heterogeneous preferences for speedy and reliable travel. We find motorists are able to benefit from privatization by negotiating tolls with private providers that increase their consumer surplus. Surprisingly, we find that by obtaining tolls and service that align with their varying preferences, motorists may be better off negotiating with a monopolist than with duopoly providers or under public-private competition. Toll regulation may be counterproductive because it is likely to treat motorists as homogeneous.

Keywords: Highway; privatization; Preference; heterogeneity; Mixed; logit (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:95:y:2011:i:7-8:p:993-1005

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