Pricing and investment of cross-border transport infrastructure

Se-il Mun and Shintaro Nakagawa
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Shintaro Nakagawa: Institute of Economic Research, Kyoto University

No 661, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: We develop a simple two-country model of international trade in which the transportation cost between countries is endogenously determined by decisions concerning capacity and price (road toll, rail fare) of infrastructure. We evaluate alternative regimes of pricing and investment, i.e., free access (e.g., public road), pricing and investment by two governments, and private operation. Comparisons between free-access and other regimes reveal that pricing plays a positive role of encouraging investment. However, pricing by governments results in lower welfare since excessively high prices are charged. We also show that higher welfare could be attained by elaborating the design of bidding systems for the right to build and operate the infrastructure.

JEL-codes: H54 R42 R48 (search for similar items in EconPapers)
Pages: 30pages
Date: 2008-09
New Economics Papers: this item is included in nep-ure
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Journal Article: Pricing and investment of cross-border transport infrastructure (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:661

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