Build-operate-transfer Schemes for Road Franchising with Road Deterioration and Maintenance Effects

Zhijia Tan, Hai Yang and Xiaolei Guo
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Zhijia Tan: The Hong Kong University of Science and Technology
Xiaolei Guo: The Hong Kong University of Science and Technology

Chapter Chapter 12 in Transportation and Traffic Theory 2009: Golden Jubilee, 2009, pp 241-261 from Springer

Abstract: Abstract Private provision of public roads through build-operate-transfer (BOT) approaches is increasing around the world. By considering both social welfare gain and profitability, the BOT problem is to determine the optimal BOT contract which can be viewed as a combination of three primary variables of concession period, road capacity and toll charge. This paper models the BOT problem as the isoperimetric problem in calculus of variations to maximize the social welfare with a profit constraint. The model explicitly incorporates the effect of road deterioration and maintenance over the years, which is assumed to depend on the traffic loads, road capacity and road natural deterioration. We find that an optimal pricing policy requires toll increase over calendar time to reduce traffic load due to time-increasing and load-increasing maintenance cost. If, however, the marginal user damage on road is independent of time, then the optimal toll charge is free from the effect of road natural deterioration and thus time-invariant. We also discuss how to reach an optimal contract through government regulations and investigate the effects of economic growth on the solution properties of the problem.

Keywords: Traffic Load; Private Firm; Transportation Research Part; Road Capacity; Road Life (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4419-0820-9_12

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DOI: 10.1007/978-1-4419-0820-9_12

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