A change in the standard of a section of road can affect traffic levels on other road sections elsewhere in a network and alter their economically warranted standards. The first part to this paper develops a theoretical framework for considering these network effects. Relationships between investments may be classed as independent, complementary, or substitutable. The implications of each type of relationship are examined where road standard is assumed to be a continuous variable and where road standard is discrete. The paper then looks at some of the problems in constructing network models to take account of interactions between investments. The demand system must fulfil the integrability condition to ensure integrability condition to ensure a consistent measure of consumers' surplus changes. A demand system is proposed which meets this condition, derived from nested constant elasticity of substitution utility functions. This system is suitable for modelling a rural network where the origin-destination matrix has to be estimated from population and traffic flow data and assuming a gravity model. (A)
Abstract