Pricing and investment of cross-border transport infrastructure
Se-il Mun and
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Shintaro Nakagawa: Institute of Economic Research, Kyoto University
No 661, KIER Working Papers from Kyoto University, Institute of Economic Research
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)
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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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